internship report on askari-bank
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Complete internship report on Askari-bank.. complete...
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INTERNSHIP REPORT
BANKING IN PAKISTAN Monetary policy and banking system play an important role in the development of all economic fields of the country because necessary finances for completion of economic plans are provided by them. therefore an organize banking system and the financial institutions plays an active role in this matter. The stable an organize banking policy is much effective to improve the level of saving and consequently the level of investment. The monitory policy is adopted and controlled by the bank but its success depends upon the cooperation of commercial banks. availability of the credit is a big problem for LDCs. The shortage of supply of capital can be improved better and organized banking system because the banks can increasing the saving through launching the various attractive schemes in various productive sectors banks also produce credit money and through this way resources are supplied to productive sectors of the country.
KINDS OF BANKS: In Pakistan following types of banks are operating in the business circle like economics.
COMMERCIAL BANKS: These banks are set up on commercial basis. Therefore, their primary objective is to earn profit And maximize it is far as possible. For this they received cash deposits from the people in different accounts. They give loans to different business enterprises and thereby create credit money. The State Bank of Pakistan is the central bank of Pakistan, Commercial Banks, financial institutions and cooperative banks are the other components of the banking system.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
AGRICULTURAL BANK These banks are provide long term and short term credit facilities to landlords and tenant farmers.
INDUSTRIAL BANK These banks are medium and long term loans to industrialists to set up new industries for the extension of industries already in operation.
MORTGAGE BANKS These banks provides the loans to the people against their moveable and immoveable property.
EXCHANGE BANKS These banks deal in foreign exchange. They provide credit to importers and exporters by discounting foreign bills of exchange.
SAVING BANKS These banks are set up to induce the people to accumulate their small saving in these banks.
CENTRAL BANKS Each country in the world has its own central bank. This bank does not deal with public directly. This means that it neither receives cash deposits from the people nor its give them loans. Therefore it is not a profit making institution.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Askari Bank was incorporated on October 09, 1991 as a Public Limited Company and is listed on the Karachi, Lahore and Islamabad Stock Exchange. It started its operations from April 01, 1992. The bank was declared as “Best Bank in Pakistan” in 2001 in Global Finance. The bank’s registered office/Head Office is situated in AWT Plaza, The Mall, P.O.Box No. 1084, Rawalpindi, (Pakistan). Askari Bank Limited has expanded into a nation wide presence of over a 100 branches, comprising commercial and Islamic banking branches, connected online and supported by a network of Automated Teller Machines (ATMs). It also enjoys an offshore banking unit in Bahrain. Over the years, Askari Bank Limited has proven its strength as a leading banking sector entity with ever increasing commitment to its clients, through a strategic investment in electronic technology. It has A1+, the highest possible credit rating, for short-term obligation, and AA+ for long-term rating. Beside day-by-day banking solutions, Askari Bank Limited has a wide range of Corporate, Consumer, and Islamic Banking products. Askari Commercial Bank Limited was the first bank in Pakistan to offer Internet banking Services and B2B e-commerce (Business to Business electronic Commerce) solutions for merchants looking to purchase on credit. They believe that balanced growth is the key to survive in the today’s global banking environment.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Mission Statement: The mission statement of the bank is “To be the leading private sector bank in Pakistan with an international presence, delivering
quality
services
innovative
technology
and
through effective
resource management in a modern and progressive
organization
culture
of
meritocracy, maintaining high ethical and professional standards, while providing enhanced value to all their stakeholders, and contributing to society”
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Core Values: We understand that our commitment to satisfy customers’ needs must be fulfilled within a professional and ethical framework. We subscribe to a culture of high ethical standards, based on the development of right attitudes. We believe in our 'core values' as the essential and enduring tenets of our organization - the very small set of guiding principles that have a profound impact on how everyone in the organization thinks and acts. They have an intrinsic value for us and bear significant importance to all our employees. They are the few extremely powerful guiding principles; the soul of the organization - the values that guide all our actions. The intrinsic values, which are the corner stones of our corporate behavior, are: •
Commitment
•
Integrity
•
Fairness
•
Team-work
•
Service
Vision: “To be the Bank of first choice”
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT CORPORATE PHILOSOPHY: I n s p i r i n g
R e l a t i o n s h i p s
From knowing our customers requirements to understanding employee needs, from utilizing modern technology to making responsible social contributions, from enhancing stake-holders value to practising corporate ethics.... We are continuously and consistently striving to address newer challenges with a single motivation: “the power to inspire and be inspired”
OBJECTIVES: Ζ Deliver solutions that meet customer’ financial needs. Ζ Build and sustain a high performance culture. Ζ Build trusted relationships with all stakeholders. Ζ Build and manage the Banks’ portfolio of business to achieve strong and sustainable shareholder return. Ζ Create and leverage strategic assets and capabilities for competitive advantage.
Ζ
To facilitate the bank with modern banking technique.
Ζ To accelerate commercial activities and capture large market share.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Corporate Information
Lt. Gen. Imtiaz Hussain (HIM)
Chairman
Lt. Gen. (R) Zarrar Azim
Chairman Executive Committee
President
Mr. Shaharyar Ahmad
& Chief Executive
Brig (R) Muhammad Director
Shiraz Baig
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INTERNSHIP REPORT
Brig (R) Asmat Ullah Khan Niazi
Director
Brig (R) Muhammad Bashir Baz
Director
Brig (R) Shaukat Mahmood Chaudhari
Director
Mr. Zafar Alam Khan Sumbal
Director
Mr. Kashif Mateen Ansari
Director
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Mr. Muhammad Najam Ali
Director
Mr. Muhammad Afzal Munif
Director
Mr. Tariq lqbal Khan Director
(NIT Nominee) Company
Mr. A.J.Mubbashar
Secretary
Audit Committy
Brig (R) Asmat Ullah Khan Niazi Chairman Brig (R) Muhammad Shiraz Baig Member Mr. Kashif Mateen Ansari
Member
Auditors
A.F.Ferguson & Co.
Chartered Accountants
Legal Advisors
Rizvi, Isa, Afridi & Angell Registrar & Share Transfer Office
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT M/s THK Associates (Private) Limited, Ground Floor, State Life Building # 3, Dr. Ziauddin Ahmad Road, Karachi – 75530 P.O.Box No. 8533, Karachi. Tel :
(021) 5689021, 5686658, 5685681
Fax:
(021) 5655595
Registered Office /Head Office
AWT Plaza, The Mall, P.O.Box 1084, Rawalpindi. Tel :
(051) 9063000
Fax:
(051) 9272455
Website: http://www.askaribank.com.pk/
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Executive Profiles
• • • • • • • • • •
Mr. Agha Ali Imam- Senior Executive Vice President M.R Mehkari - Senior Executive Vice President Suhail Ahmad Rizvi- Executive Vice President Mr. Nazimuddin A. Chaturbhai, Senior Executive Vice President Malik Asad Ali Noon, Executive Vice President Mr. Tahir Aziz, Executive Vice President Mr. Israr Ahmed, Executive Vice President Mr. Riaz Khan Bangash, Senior Vice President Mr. Nauman Bashir Khan, Senior Vice President Mr. Muhammad Ahmed Khan-Senior Vice President
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Branch Network.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Product and services: Personal Finance
Personal Finance is a parameter driven product for catering to the needs of the general public belonging to different
segments.
One
can
avail
unlimited
opportunities through Askari Bank's Personal Finance. With unmatched finance features in terms of loan amount, payback period and most affordable monthly installments, Askari Bank's Personal Finance makes sure that one gets the most out of his/her loan. Once a good credit history is established, the door to opportunity opens much wider. 13
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INTERNSHIP REPORT
Mortgage Finance
Askari "Mortgage Finance" offers the convenience of owning a house of choice, while living in it at its rental value. The installment plan has carefully designed to suit both the budget & accommodation requirements. It has been designed for enhancing financing facility initially for employees of corporate companies for purchase/ construction/ renovation of house.
Business Finance In pursuance of the National objectives to revive the economy of the country, ACBL is providing loans to small and medium size business enterprises under Askari Bank's Business Finance Scheme. Our goal is to offer a loan, which enables business community to receive the financing required by them based on their cash flows. Our valued customers can enjoy the convenience of getting financing on attractive terms with the minimum processing turnaround time.
Smart Cash 14
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT This personal line of credit would be set up with a specified credit limit upto Rs. 500,000/-
Auto Financing Yet another of our products, Askar offers the most convenient and affordable vehicle- financing scheme, which provides our valuable customers an opportunity to own a brand new vehicle of their choice. With minimum down payment, lowest insurance rates and widest range of available car makes and models, Askcar offers the best value to our esteemed customers
ASKARI CARD ASKCARD means freedom, comfort, convenience and security, so that you can have retail transactions with complete peace of mind. ASKCARD is your new shopping companion which enhances your quality of life by
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT letting you do shopping, dine at restaurants, pay your utility bills, transfer funds, withdraw and deposit cash through ATM anywhere, anytime.
TYPE OF CREDIT CARD. There are three types of credit cards issued.
i.
Silver card
ii.
Gold card
iii.
Local card
* Silver card has limit
upto 2 lac.
* Gold card has limit
upto 5-lac.
* Local card has limit
upto 2 lac.
Silver and Gold card can be used internationally for shopping and also can be used for internet shopping. * Local card can be used in Pakistan.
Travelers Cheques The range of our products and value added services enhances with introduction of Rupee Travelers Cheques (RTCs) launched in March 2002. In spite of our constraint on issuing higher denomination of RTCs against restrictions imposed by the Central Bank of Pakistan we have been striving to attain our shares with sizeable portfolio.
Value Plus Deposits
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The first liability product launched by this unit is showing a remarkable acceptability in the market. The growth of this product is witnessed by its share, which has presently reached at Rs. 1,079 Million even after lowering down the profit rates due to sufficient liquidity in the market.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
FUNCTIONS OF ASKARI COMMERCIAL BANKS 1. Accepting Deposits Cash in the hand of the people is unsafe because it can be lost. moreover, because some people lack entrepreneurial talents and therefore do not make investment in any enterprise, but they want income on the amount of money they have. Bank promises to solve these problems of people. Banks receives three types of deposits from the people. Current deposits Fixed Deposits. Saving Deposits.
Advancing Loans Every bank has learn experience that depositors do not draw whole of their deposits at a time. They only draw a part of it for day to day transactions. Therefore, a bank keeps a part of total deposits as “cash reserve” to meet the cash demand of depositors and advances the remaining part of deposits to businessmen on interest. A bank gives loans entrepreneurs/businessmen in the following ways: By Opening a loan account. By means of overdraft. By discounting bills of exchange. 18
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT By purchasing bonds and securities.
Creation of the safest medium of exchange: It is neither safe nor easy to make payment in the form of metallic coins or paper notes. Therefore, payments are made by cheques these days.
Agency Services A commercial bank performs many services as an agent of its clients or depositors. It makes payments on order cheques issued by its depositors. It receives the amount of money on crossed cheques issued in the favour of its clients and deposits the amount in their accounts.
General Utility Services A bank provides general utility services to its clients as well, for example it keeps their precious documents, gold ornaments, bonds and shares etc. in safe custody in its lockers.
Financing of Foreign Trade. A commercial bank receives foreign exchange earned by exporters and makes payment also in foreign exchange in foreign countries on behalf of importers. It also advances loans.
Departments Of Askari Commerical Bank Accounts Department Cash Department Clearing Department 19
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Credit Department
DEPOSIT & ACCOUNT OPENING DEFINITION OF BANKERS As defined in section 3(b) of negotiable instrument act 1881, ‘”bankers” means the person transacting the business of accepting for the purpose of lending on investment of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, or otherwise, and include the post office savings the bank.
DEFINATION OF THE CUSTOMER: A customer is the person who maintains a regular bank accounts without taking in to consideration the duration and frequency of operation of his accounts it means that the person becomes a customer of the bank as soon as he open his accounts deposit money in the same and the bank accepts the said deposit.
QUALIFICATION OF CUSTOMER: He should not be a minor because a minor is not competent to contrect.according to section (3) of the majority act 1875 a person is deemed to have attained the age of majority when he has completed the age of (18) years. He should be a person of sound mind Section (12) of the contract act says that “the person is said to be of sound mind for entering into contract if at the time when he makes it he is capable of understanding it and of forming a rational judgement as to its effects upon his interest. He should have not been debarred from entering in to any contract under the law. 20
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT There is an offer by the customer and acceptance by the banker. The customer offer the money to deposit and banker offers to accept it.
RIGHTS OF A CUSTOMER A customer has the following universally accepted rights. To draw cheques against his credit balance in the account. To receive pass book or statement of his account. To sue the bank for the cost, loss and damages, when his cheque is wrongfully dishonoured by the banker. To sue when the banker has not maintained the secrecy of his account, except when it is done under compulsion of law in the interest of the bank or as the duty to public.
DUTIES OF THE CUSTOMER Section (72) of negotiable instrument act 1881 lays down that the customer must present the cheques for payment and collection with in the business hours of the bank. To keep his cheque book under lock and key To draw the cheques very carefully so that there is no room for any fraudulent additions or alterations. To see that the cheque issued by him presented to the bank for payment with in a reasonable time.
OPENING OF ACCOUNT The banking history is replete with various instances of fraud largely due to incorrect opening of accounts. These fraud could have been avoided in if the branch managers and other designated officers had taken due care and exercised required precautions at the time of opening of accounts. 21
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT At the time of opening of accounts, officers should tactfully obtain as much information as possible about the integrate and character of the person, his correct name, address and occupation. This infect will be the only opportunity when they will be able to talk to the prospective customers in a friendly and frank atmosphere. This is the time when they have a slight edge over the customer. He or she at this point of time is willing to divulge as much information about his personal status and business etc to the bank manager. It is therefore necessary that due care and proper procedure be followed for opening different types of accounts for various types of customers. Askari commercial bank limited has the following classifications of accounts, A
INDIVIDUALS ACCOUNTS
B
PARTNERSHIP FIRM ACCOUNTS
C
JOINT STOCK COMPANY ACCOUNTS
D
AGENCY ACCOUNTS
E
CLUBS, SOCIETIES & ASSOCIATIONS ACCOUNTS
F
EXECUTORS AND ADMINISTRATORS ACCOUNTS
G
TRUSTS
H
LOCAL BODIES ETC.
I
PROPERITORSHIP
J
JOINT ACCOUNTS
K
OTHER MISC ACCOUNTS
When a customer open an account under the law he enters into a contractual relationship with the bank. At the time of opening the account, intended customer must have the following characteristics: 22
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT A
He must have reached the age of majority
In term of section 3 of the Indian majority act 1875 (as adopted in Pakistan) a person is a major if he attain the age of 18 years. However, the age of majority shall be 21 years in case of European nationals and also where guardian is appointed under the guardians and wards act. A person who is under the age specified herein above is considered a minor. in term of section 11 of the contract act, a minor is declared incompetent to enter into a contract. As such, any contract with a minor is a void. However , the banks generally allows the minor to open accounts with a view to inculcate in them the habits of saving. Such account is opened jointly with their guardian and are allowed to be operated by the guardian. The guardian for the purpose will sign the account opening from and the specimen signature card. B
He must be of sane mind
A person is said to be of sane or sound mind it he understands the terms and the conditions of the contract and is capable enough to form rational judgement as the effects of the contract upon his interest. C
He must not be insolvent and bankrupt.
At the time of opening the account, he should not be adjudicated as insolvent. Generally a person is considered as insolvent if his liabilities exceeds the assets he is possessing. D
He must not be debarred under any law from entering into any contract.
It is the duty of the banker to make sure that all above criteria is satisfied before he allow the opening of the account. For general guidance of the officers, given below are the essential points that must not escape their attention while opening the accounts.
WHO DEAL WITH OPENING OF ACCOUNT:
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT As for as possible the account opening job should be handled by the branch manager himself. Only in exceptional cases in main branches, the job may be assigned to other officers.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT INFORMATION: As much relevant information as possible must be elicited from the prospective customer relating to his means, line and place of business etc.
FORMS TO BE FILLED IN CAREFULLY: Each and every column of the account opening form should be neatly and correctly filled in with necessary details.
INTRODUCTION OF ACCOUNT: Account must be properly introduced. In this concern, the following precautions are to be observed. I
As for as possible, the person introducing the account should attend the
personally with the prospective customer. This would serve the dual purpose. A
The branch manager shall have the opportunity of eliciting vital
information as to the standing, respectability and the means of the person he is introducing. B
The identity of the customer must be properly established beyond any
doubt. Iintroducing from person having doubtful dealing with the bank should be discretely declined. The staff member generally should not introduce the account. They will introduce accounts only for those persons who are personally known to them and whose credentials are absolutely clean.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT As for possible, the account opening form should be completed by the prospective customer in presence of the introducer who is then aware of the particulars furnished and can corroborate the same. Specific information concerning the profession should be recorded in the account opening form. The description private Service’ or ‘Businessman’ is insufficient. Signature on the account opening form must be put by the customer will attest them properly in presence of introducer. No cheque book should be issued to the new accounts are properly introduced. Account may be opened with cash or cheque. Initial deposits, it is incumbent upon the Branch Manager to satisfy themselves additionally that title of account holder is genuine for the cheque deposited. Prudent bankers avoid opening new accounts with cheque. Letter of thanks should be sent to the introducer the day the account is opened. This precaution would accomplish the purpose of intimating the introducer that the account has been opened on strength of his introduction thereby inviting disclaimer if untrue. A letter of thanks should be sent to the new account holder, preferably through registered mail, to verify his address. In the evening, the officer of the branch should visit the customer’s area to establish that the address given by the customer is correct and the commands respect and honour in the neighbourhood/vicinity he is living. Number of the customer’s national identity card should be correctly recorded in the account opening form and copy of it should be kept on record. No account should be opened in the name of an undischarged insolvent.
TYPES OF ACCOUNTS Let us now turn to procedure to be followed in case of each type of accounts.
INDIVIDUAL ACCOUNTS: Such account may be classified as follows: Accounts of literate ladies and gentlmen.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Accounts of parade observing ladies. Joints accounts. Minor accounts. 1.In order to open the account for literate people an account opening form, signature card, form “A”, and an ID copy are required with Rs. 2500 for opening account and he must fulfil all customer characteristics. 2.In case of illiterate ladies and gents, the following precautions are observed in addition to those provided in the above guideline. a) Two photographs are to be obtained one to be pasted on account opening form and the other specimen signature card. b) Instead of signature left hand thumbs impression to be obtained on the specimen signature card from gents and right hand thumb impression from the ladies. c) Each time such customers should attend the bank personally and will put their thumb impressions on the cheque before the passing officer. d) Such customers should be advised not to issue cheque payable to third parties. e) Cheque should be marked payment in person to ensure even if the cheque is presented through clearing that particular cheque can only be paid in person 3.When account is opened by more than one person but the relationship between them is neither of trustees nor partners it would be termed as joint account. Whenever such accounts are open-end, definite instruction regarding operations on the account and payments of balance in cased of death of any one of them should be obtained.
4.A person who is under the age as specified above is considered as minor, a minor is declared incompetent to enter into a contract. However, the banks generally allow the
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT minor to open accounts with a view to the condition of saving habits. Such account is opened jointly with their guardian and is allowed to operate by the guardian.
ACCOUNTS OF PARTNERSHIP FIRMS While opening accounts of the partnership firms, the partnership deed from registered firms is required obtained in the addition to account opening form and specimen signature card. The partnership letter is attached with the accounts opening form, which must also be signed by all the partners of the firms whether registered or unregistered. In these accounts, the following points should be remembered. 1.All the partners must sign the account opening form. 2.The names of persons authorised to operate the account must be neatly and correctly given in the account opening form. 3.For partnership concerns carrying on the business under impersonal name it is generally described that the title of accounts should show name of the partners or managing partner. 4.A cheque payable to the firm should not be accepted for credit to personal accounts of the partners without the written authority of all the partners. 5.The maximum numbers of partners in general business 20 and the minimum is 2 for the banking firms the maximum numbers of the partners is 10 in Pakistan however bank can not be opened by the partnership concern 6.Since these are the business concern they will be allowed to open current accounts. No saving s bank accounts be opened in partnership name. Partnership account opening required following documents: 1) Account opening form (A.O.P) 2) A.O.P should be duly introduced 3) Copy of N.I.C Of all partners 4) Registration certificate (optional)
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 5) Partnership deed 6) Rubber-stamp on letterhead of the firm
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 7) Letter Head 8) Official capacity (It means that all the partners will sign and choose the singe for operation of account with the bank. And in account opening form the name of the official capacity is written in special instruction and recommended by all the partners).
ACCOUNTS JOINT STOCK COMPANIES Joint stock companies include
Private limited companies and
Public limited companies
PRIVATE LIMITED COMPANIES Private limited companies are those where the share capital is not offered to the general public instead the offer is restricted to particular class of society or with in the family members. Generally their share are not transferable. The minimum number of shareholder is 2 and maximum, is 50 private limited company are not listed on stock exchanges and therefore their shares are not publicly quoted.
PUBLIC LIMITED COMPANIES: In this case, the promoters and general public contribute share capital. Any Pakistani who is authorised to enter into contract can purchase share. Shares of these companies are transferable and brought and sold freely in stock exchanges. The minimum number of shareholder is 10 whereas there is no upper limit. The following documents are required for joint stock companies account opening. a). Copy of resolution While opening the company’s account, the manager must ensure that board of directors of the company is properly constituted and request for opening the account comes through resolution of the board of directors. The resolution for account opening should bear company seal and signed by the chairman of the meeting where such resolution is
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT passed and counter-signed by the company’s secretary or authorised director must be submitted to the bank before an account can be opened. b) A.O.F. duly signed. c) Memorandum of Association & Articles of Association. d) Certificate of Incorporation. e) Certificate of Commencement of Business (only required for public limited companies. f) National identity cards of directors. g) List of director with their shareholding. h) Specimen signature card duly signed
ACOUNT OF PROPRIETOR: 1.A.O.F should be duly introduced 2.Copy of N.I.C of proprietor 3.Specimen signature card duly signed 4.Proprietorship declaration concerns on firm’s letterhead.s
ACCOUNTS OF CLUBS, SOCIETIES AND ASSOCIATION: Clubs, societies and associations are non-profit and non-trading in nature. They have their own rules and regulations and committees mention their affairs, which is called Governing Bodies. Documents that are required are: i)
Account opening form
ii)
Specimen signature card
iii)
Resolution to be passed by their governing bodies
iv)
Certified copy of rules and regulations or Bye-law
v)
Letter of registration
vi)
Letter of undertaking to the effect that as and when change take place they will inform the bank of such changes.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
DEPOSITS: Deposit is the lifeblood of a commercial bank. Main function of a commercial bank is to enhance the savings from the savers to the ultimate user of funds. The process of collecting savings is called Deposit Moblization.
FORMS OF DEPOSITS: Two broad forms of deposits with reference to time period are:
A) Demand deposit:
These are payable on demand. They include current account,
sundry deposit (e.g. margin account) and deposit receipt. No profit is given on demand deposits.
i)
CURRENT ACCOUNT:
ii)
This type of account is usually opened for businessman or such persons who needs deposits and withdrawals facility without any restriction. Introduction is necessary when opening a current account, the procedure has already been explained else were in this book and account number is allotted and for withdrawals cheque book is issued and a statement of account is provided so that customer can reconcile his account with his own record. No interest return is paid on such account is Pakistan, This account can be opened
with Rs. 500. Banks usually recover service/incidental charges on current account if the required minimum balance is not maintained. Or when the maintenance of the account becomes expenses e.g. For example too many transactions take place on summing a large number of chequebooks and other stationary not consistent with the average balance.
ii) CALL DEPOSIT RECEIPT:
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT It is a contract for a specific deposit transaction and is used as a security for bidding etc. It is non-transferable and is payable only to beneficiary or purchaser.
iii) SUNDRY DEPOSIT -MARGIN ACCOUNT, At the time of issuance of LG / LC or acceptance the party is supposed to deposit is kept in an account called sundry deposit. Margin account Similarly, at the time of allotment of locker the locker holder is supposed to deposit a certain sum as security, which is kept in sundry deposit account.
FEATURES OF MARGIN/SUNDRY DEPOSIT ACCOUNT. Reduces risk/exposure. Free of cost deposit enhances profitability Respective accounts are opened.
DepositNon checkingMinimum Rate of has no approach Payment Product Base. account- rather customer to thisofaccount. As far as Accounts
Balance (Rs) Return p.a. % Return
FISDA (financial institutional special deposit
50,000 &
0.25%
Monthly
Daily
above
account)
ASDA (Askari special deposit
50,000to 999,999
1.00%
Monthly
account)
1000000& above
2.00%
Monthly
Deposit
Minimum
Accounts
Balance (Rs) Return p.a. % Return Minimum
Value Plus (saving account) Notice deposits
07 days 30 days
Rs 10,000
Rate of
2.00%
Payment of
Monthly
Daily Product Base. Minimum monthly balance
33 5,000 0.50% Maturity Daily THE ISLAMIA UNIVERSITY OF BAHAWALPUR 5,000 1.00%
INTERNSHIP REPORT It relates to the liability L/C, L/C acceptance and is adjusted when liability is redeemed/released.
B) TIME DEPOSIT:
Payable on demand with certain maturity. Attracts profit with
respect to time. PLS Saving accounts
maturates Askari FISDA (ASDA) Special notice time deposits are of two types: i account Askari Special Deposit Account.e. 7 & 30 days notice.
All TDRS (term deposit receipt) of different, maximum one year.
SAVING ACCOUNT (INTEREST BASED SYSTEM) As the name denotes savings accounts are basically meant for mobilizing saving of people. In the interest based system a saving account could be opened with only Rs. 2500 for new persons but regular customer’s saving account can be opened with Rs. 500 for single individual or for two or more individuals jointly, charitable institution, provident or other funds of benevolent nature for local bodies, autonomous corporation, companies, associations, educational institutions etc.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
CLOSING OF ACCOUNTS. TDR One month
5,000
1.00%
Two months
5,000
1.25%
Three months
5,000
1.5%
Six months
5,000
2.00%
One year
5,000
2.50%
Maturity
Daily
Six monthly
Daily
It is the prerogative of either party to the contact i.e. the banker or the customer whether to keep the account with a particular bank or close the same without assigning the any reasons. A customer generally uses this discretion. •
When the particular branch becomes out of the way or too far from his place of business.
•
The purpose for which the account was opened has been served.
•
The bank branch is unable to give him certain credit facility that he requires. In such a case the customer should surrender the unused chequebooks to the bank and
withdraw the balance lying to his credit after informing the bank formally. Bank may also closed the account of the customer after notifying the banks intention and giving him a reasonable time to make arrangement to have his cheques in circulation presented for payment before the notice period expires. Closing of customers account warrants a proper Notice determining the contractual relationship. Following are the reasons by which bank can close the account of customer.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
a)
By frequently drawing cheques much in excess of the balance in his account which are return unpaid.
b)
By introducing accounts of parties, which becomes undesirable in cause of time.
c)
By frequently contravening the Rules for operation on the account.
d)
By making himself aggravate during his visit to the banks branches and picking quarrel with the staff unnecessarily.
LOCKERS: ACBL also offers the facility of lockers of three type to it customer to offer security.
Types
Size
Annual rent (Rs) or
Refundable
deposit (Rs)
Small Medium
6 inches x 2feet
1,000
15,000
12 inches x 2feet
1,500
20,000
2,500
35,000
Large
2 feet
x 2feet
Key deposit is Rs 1,000 per locker. In the case if customer lose the key of locker then breakage fee will be charged about Rs. 2,000 per locker plus actual charge of supplier of locker.
DOCUMENTS REQUIRED FOR LOCKER OPENING: ⌠
Locker opening form
⌠ ⌠
Specimen signature card Copy of NIC
Applicant should be account holder in the bank.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
CLEARING Clearing is a system by which bank exchange cheques and other negotiable instruments drawn one each other within specified area and securing the payment for their clients through the clearing house. A clearinghouse is an organization where these cheques are brought and the mutual claims of each bank on the other are offset ad settlement is made by the payment of difference. The responsibility of operation for the clearinghouse function lies with the state bank of Pakistan. The function of clearing can be understood with the help of a simple example. Every bank has its account with state bank of Pakistan. Suppose on of the account holder of ACBL brings a cheques of habit bank of (Rs 7000/-). Now in state bank of Pakistan the representatives of both banks will appear for clearing physical payment of cash is not made, but our banks (ACBL) account would be reduced by RS. 7000 and increased by Rs. 10,000 the reverse would be true for habit bank limited the clearing may be “for” or “against” if our bank’s A/C in sbp contains a net debit balance then it would be for and if credit balance then it would be “against” clearing.
COLLECTION OF CHEQUES; These cheques may be drawn on UBL HBL, or MBPor other banks of Pakistan. The clerk collects all the cheques of different banks and prepares schedule for them. Representatives of all banks will receive the cheques related to their branch either issued by its branch or other banks. If bank transfers funds in the same city, it is called IBC “INWARD BILL OF COLLECTION” and if bank transfers funds to another city when it is called OBC OUT WARD BILL OF COLLECTION. Bills are of 2 types Clean and documentary clean bills include finance instruments and documentary includes documents attached with goods. . 37
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT ADVANTAGES OF CLEARING: Systematic arrangement for collection and clearance of cheques. Speedy and economic collection and clearance of cheques. Clearance of cheques and other instruments of different branches of different banks in a systematic manner without any flaw and mistake. The collection and clearance of Govt. bills, instruments, and cheques. The collection of Govt. revenue through cheques, pay order and drafts payable through the State Bank of Pakistan and National Bank of Pakistan. It avoids the difficulties and cumbrances to be faced by the branches if they collect the instruments directly from branch to branch. Confidence among the clearing members is produced.
CLEARING OUTWARD: When the customer deposits cheques and other instruments of other banks for collection, we send the cheques in outward. Clearing.
PROCEDURE: cheques are received duly entered on pay-in-slip. Counter foil is returned to customer after signatures. Crossing stamp is fixed on the cheque. Clearing stamp is fixed on the cheque and pay-in-slip. Clearing stamp with next date is fixed on the cheque and pay-in-slip. Endorsement stamp is fixed on the reverse of the instruments.
CLEARING HOUSE;
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT In the clearinghouse the representatives of all the banks gather and exchange their instruments. They enter the total amount of cheques delivered and
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT received in their summary sheets. The total of schedule received tally with the total of summary. Clearing cheques received from other banks are sent to branches which will clear the cheques and instruments to respective amounts. Some cheques are returned un paid with the reasons mentioned in the cheques return memo.IBCA for net amount is sent to main branch. In the 2nd house clearing cheques are return and exchanged by the representative of the banks. A summery is prepared for cheques received and delivered and net position is ascertained. Amounts are settled through SBP accounts. After cheques are returned, the main branch sends IBCAs for net amount to the branches. Computer entries are made for (-) credits for returns and debits to main office A/C.
INWARD CLEARING: In clearing house the cheques received from other banks are collected & sent to branches for their payment. Crossing stamps, clearing stamps and endorsement are checked. Crossing stamp other than collecting bank is cancelled. Cheques & instruments are posted to the debit of respective accounts. Any instruments returned un-paid shall be returned in the second session of the clearinghouse i.e. 2nd clearing. Cheques & instruments if un-paid are returned along with return memo. IBCA,s for net amount is sent to the main branch.
ENTRIES FOR O/W CLEARING: Dr. Suspense A/C clearing. Cr. Customers A/Cs.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT FOR I/W CLEARING: Dr. customers/Cs clearing(for return) Cr. suspense A/C clearing (1/W clg)
TRANSFER DELIVERY: This is the arrangement by which instruments of the branches of the same bank with in the city are collected and cleared.
OUTWARD TRANSFER DELIVERY: The system is just like outward clearing. In outward clearing branch wise schedule are prepared. The clearing instruments are presented to the branches through main branch of the city. This is more effective & speedy process as compared to LBC because fate is received next date.
PROCEDURE OF O/W TRANSFER DELIVERY: The customers deposits cheques & instruments of the branches of ACBL at Lahore along with pay-in-slip duly filled in. Crossing stamp is fixed on the instruments. Transfer delivery stamp is fixed for next date. Endorsement stamp is fixed on reverse of the instrument. Payee’s A/C is credited Askari Commercial Bank Ltd Badami Bagh Lahore.
INWARD TRANSFER DELIVERY: Cheques drawn on the branch are received with the schedule. The entries are made in the I/W. TD register and balanced with the summery of T.D. 41
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT cheques are debited to respective account and cheques which are not passed returned with the objection memo. The IBCA is sent for the net amounts for cheques passed.
INTERNAL CLEARING: When the customer deposits the cheques in the branch drawn on the account in the same branch. The cheques are received along with the pay-in-slip. The amount is transfer from the account where the cheque is deposited and credited to the account where it is transfer.
SPECIAL DELIVERY: SBP conducts special clearing when clearance of special Government revenues is required. Government cheques. Pay order treasury cheques are cleared and paid.
Remittance department plays an important an important role in transfer of funds; it includes DD, TT, MT, TC and pay order. It is an instrument payable on demand for which value has been received issued by the branch of the bank drawn i.e. the payable at some other place (Branch) of the same bank.
TRAVELLERS CHEQUES (TC): TC (traveller’s cheques) is for all branches with no charges. We give the money in cash/cheque/direct debit instructions to the banker and he gives in return the slips of Rs.10,000, Rs. 25,000, Rs.50,000, Rs.100,000, Rs.500,000 which is required. Now government has made some restriction against TC because people have stared it to
42
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT use in place of money. There are no charges of any type such as postage, taxes, commission charges.
TELEGRAPHIC/MAIL TRANSFER (TT/MT): This is an instrument that is use to transfer the money from one branch to other branch of same bank through bank. The person known as payee, for whom TT is made, TT is only paid to him after seeing his ID card. TT has been made on following modes of payments. 1. On cash. 1. On cheques. 2. Through debiting account no. After issuing TT it is get registered in issuing register. Which required TT/MT no. payee name and address, amount, account no.(if through account payment has been made), cheque no.. Along TT/MT an advice also be send to other branch from where money will be drawn, that advice is called telex message. On the basis of which the other branch will pay the money after tallying serial no. and test no. of TT. TT is made if the client has account in the bank if he has no account then he has to fill the TTR (telegraphic transfer receipt) which is a voucher for the official record in bank. Its form is of blue colour. In DD the person has to take care of DD which is issued to him.
Demand Draft (DD): The demand draft (DD) is issued to the person who want to draw money from another branch in any other city, then by showing that draft he can easily draw money if he has account there. Demand Draft is issued by one branch of bank payable to other branch of the other bank e.g. DD is issued by ACBL payable by MCB. The person who pays the value and on whose behalf draft is issued is called purchaser. 43
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The Branch/Office which issues a draft on another branch or office is called the drawing/issuing branch. The Branch /Office on which draft is drawn is called the drawee branch. The person entitled to receive the payment is called the payee. DD also has been made on three modes of payments. 1. On cash. 2. On cheques. 3. Through debiting account no. ISSUANCE OF DD: Request shall be on the standard DD application form. Fill in all information such as name of beneficiary place where the DD is drawn, amount, mode of payment cash/cheque /debit authority signature with name and addresses. Check the application form. Charge commission as per schedule of charges. Get voucher from cash department. After the customer has made payment by cash /cheque. Prepare the demand draft (Security Stationery) The issuance of DD is computerised and the amount is automatically protected graphed during printing for avoidance of forgery. Entry is then made in DD issued register, in the DD issued register separate folio is allotted for each draw branch and a serial control number is applied. After issuance of DD, an advice is send to the branch from where client wants the money to be drawn, which confirms the DD. In this aspect cantra is another concept, which is followed in the branch where money is transferred. Payment of DD takes place in two ways: 44
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 1. If advice reach the other branch before the draft then that branch debit the H.O of bank and credit client. 2. If draft reach first then bank open the temporary account called suspense account or red account through which amount is debited for the satisfaction of client and credited the H.O of bank when that branch receives the advice than it debit the H.O of bank and credited the suspense account. There are postage and commission charges.
CANCELLATION OF DD: •
Obtain application in writing along with original DD.
•
Verify the signature of applicant. This signature should tally with signature on DD application form.
•
Mark cancellation in DD issued register.
•
Payment from suspense account DD cancelled after recovery of cancellation cheques as per current schedule of charges.
•
Inform the drawee branch regarding cancellation and ask for IBCA.
•
On receipt of IBCA adjust amount paid out of suspense account.
Lost/Stop Payment/Issuance Of Duplicate DD. •
Get application from purchaser and verify the signatures.
•
Inform the drawee branch of the loss of DD and advise them to mark caution against payment if presented.
•
After necessary checking, the drawee branch will inform us about the status of DDwhether it has been paid or is still outstanding.
•
Write on the face of duplicate DD in red ink “Duplicate in lieu of original DD. no.____ dated ____ reported lost”. 45
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT •
The duplicate DD will have the same control number.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT •
The printed number and serial control number of DD issued shall be mentioned on the application form.
•
Signatures of two attorney holders with their attorney number should obtained on the DD. The 2nd signing officer must check all the particulars before signing.
The postage rate is fixed Rs.25and commission rates are as following:
PAY ORDER: Pay order is also called “banker’s cheque” drawn upon the issuing branch/Office itself. It required account no. and other information about client which mean cross payment is its restriction. •
Get the application form. Issues pay order after recovering charges.
•
Do necessary vouchering. Make entry in PO issue register.
•
All pay orders shall be crossed “payee’s account only”.
•
It may be noted that IBCA is not involved because PO are payable in same branch.
CANCELLATION OF PO: •
Application for cancellation. Surrender of original pay order. Recover cancellation charges.
LOST AND DUPLICATE PAY ORDER. Check the record to ensure that payment has not been effected. Get application for issuing of duplicate PO. Recover charges. Issue duplicate pay order.
Pay slip: The banks for settlement of its own payment issue pay slips. There is no excise duty and no commission.
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INTERNSHIP REPORT
48
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT “CrediT
Department” “The major source of bank’s income
Credit department is most important department of bank to earn her income by lending money to other at different rates as compare to that deposit interest rate. Normally, bank takes money from depositors at rate X and utilize those funds by advancing them at X+1 rate, so X- (X+1)=1 this 1 is the income of the bank. If we say that bank is body then credit is blood of that body. It generates revenue for the bank so credit decisions are to be carefully analyzed.
Different departments are working in SBP to monitor credit. * BCD.................. Banking control Department. * BSD.................... Banking supervision Department. * BPRD ............... Banking policy and regulation department, Commonly operations regulate credit size, sector and bank. Credit line is given to banks finance the purchase of crops after every six months .
NATIONAL CREDIT PLAN: Every year economic survey is made and with the help of this survey government patronize certain sectors and also advise banks to give more loans in these sectors. According to this year the agriculture sector is the target for financing.
CREDIT REGULATION 1992: In 1992, certain regulation are made by SBP for credit advancement: ⌡ Bank cannot lend more than 10% of its reserves. ⌡ No bank can lend to its directors. 49
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT ⌡ No bank can finance its own shareholders. ⌡ If bank finance to other bank’s shareholder than it has to take permission from SBP. ⌡ Bank has to handle its suspense liabilities within 30 days. ⌡ Advances ratio should not exceed 65%. Bank should check the current ratio of the customer.
PROCEDURE FOR TAKING LOANS: For taking loan first credit line proposal (CLP) is made. In a CLP there are different types of documents: Application form Credit information
Application form: The customer requests the application form from the bank for the loan. Some documents are also attached with the application, which are of two types: •
Permanent Information Memo
•
Charge Document
• Permanent Information Memo: These are the documents in which there are permanent information of customer and his business.
Charge Document: Charge document is made for the security purpose. These document are sign by borrower. Purpose for sign is that if the borrower does not pay the loan in a certain specific period of maturity then these documents can be shown in a court against him.
Credit Information:
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT For the satisfaction purpose bank also take credit information about the party. Credit information is taken from the Credit Information Bureau (CIB). This type of
information is taken when loan of huge amount is taken, above 5 million. Clearance report is checked. All these documents are arranged in a file. This file is called credit line proposal. Every loan is sanctioned after the preparation of CLP.
DISCRETIONARY POWERS OF ADVANCES: Up to certain limit each level can give orders of advancing loan but for the bigger amount branches have to take permission from upper level of authorities. Credit sanction advice move through these levels.
B o a r d o f d ir e c t o r s E x e c u t iv e c r e d it c o m m it t e e H e a d o ffic e c r e d it c o m m it t e e A r e a o f f ic e c r e d it c o m m it t e e B r a n c h c r e d it c o m m it t e e OF BAHAWALPUR THE ISLAMIA UNIVERSITY 51
INTERNSHIP REPORT
TYPES OF SECURITIES Normally loans are of two kinds. i. Clean loans. ii. Documentary or secured loans. In clean loan no tangible securities are taken from the customer. But in secured loans tangible securities are Different kinds of secure securities are •
Deposit with bank.
•
Deposit with other banks.
•
Government securities.
•
Account receivable /notes receivable.
•
Inventory.
•
Moveable /immovable property Fixed assets are hypothecating, Pledging or mortgaging. In these three cases tittles
charge and control varies among bank and the borrower Type Hypothecation Pledge Mortgage
Title Borrowers
Charge Bank
Control Borrowers
Borrowers Joint
Bank Bank
Bank Bank
GOOD LENDING PRINCIPLES. There are five good lending principles, which are kept in mind while considering a credit decision.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 1. SAFETY Lending must be safe enough and given to one who already has the ability in the form of cash flows to show and for this purpose some liquidity security should be pledge. 2. SUITABILITY Lending must fit into the plan and loans are given to a business a growing industry. 3. LIQUIDITY. Business cycle should be complete in one year. The credit will be refunded in liquid form and for debt security bank consider most liquid security. 4. DISPERSAL Loans should be given in diverse sector and should not be concentrated just to one sector to maintenance balance growth of economy. 5. REMUNERATION Lending must be remunerative and ultimate goal is to maximize the profit.
RISK ANALYSIS We know higher the risk higher the return but risk must be carefully evaluated. There are five Cs, which should be considered. 1. CHARACTER Normal and social character of an individual or organization should be good. He should not be involved in any illegal and unethical business like smuggling or black- marketing. 2. CAPACITY Borrower must have the capacity to take the loan and repay that loan. 3. CASH There must be regular cash flows of business because liquidity is important for refund of loan. 4. COLLATERAL Transaction must be secured by collateral. The applicant should have such amount of asset that can be used as security of credit he has taken from bank. 53
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 5. CONDITIONS Different conditions are important to minimize the risk of lending mostly these conditions are two kinds. These conditions relate to industry and country environment.
•
Positive condition: Bank does not restrict the applicant to do something but it demand for some paper to be signed.
•
Negative condition: Bank restrict the applicant to invest this credit in pre-specified business.
TYPES OF LENDING: There are two types of advances: A. Funded finance B. Non-funded finance
A. FUNDED FINANCE In a fund base loan cash are involved. In these loans cash transaction are made directly. Fund based loans are further divided into five types:
1.
Running finance
2.
Cash finance
3.
Term finance
4.
Staff finance
5.
Clean finance
6.
Mortgage finance
7.
Trade finance
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 1. RUNNING FINANCE This is also known as current finance or hypothecation. Per day mark-up is a charge but customer is flexible to draw within the drawing power. Hypothecation of stock is the prime security. In running finance amount is mentioned clearly. Mark-up is charges on the amount that is drawn not on full amount. Previously this is known as “overdraft”, in which customer can withdrawal his credit account in excess of credit in it.
2. CASH FINANCE This is just like in running finance the only distinction in this case security is stock pledged form and the security margin is also charged. Chequebook is not issued. Cash flow must be regular one. Bank issues delivery order if the borrower wants to draw stock equal to money deposited by customer. 3. TERM FINANCE Its time period is fixed. Amount and mark-up rate is mentioned. Mark-up is charged on the full amount of loan because amount is withdrawal at once. Term finance is secured by security. Credit should be given according to the security. It is more profitable than running and cash finance because mark-up is charged on whole amount. There are some cases when long term finance is also provided, these are: * Existing plant is in running and expansion in it is needed * To running plant for replacement of machinery * To running plant for modernization
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 4. STAFF FINCNE (PERSONNEL) This facility is given to the staff of ACBL. The amount of loan depends upon the rank of staff. * OG iii to OG I the amount of loan is
Rs,25,000
* Above OGI up to SVP
Rs.50,000.
* And above SVP
Rs.100, 000
Repayment period is 2 years and instalments are deducted from salary. Mark-up rate is 5% no security is needed it is against GP fund. The eligibility is 2 years or more service. 5. CLEAN FINANCE: These are the special types of finance is given without the security. In the ACBL these type of finance are given to the Army officers mostly. The amount of this finance is Rs 25000. The bank should not be given more than Rs. 25000. 6. MORTGAGE FINANCE This I also transacted through Retail Banking Division. as a security simply the mortgage of property is demanded by the bank. this is for three purposes; * Purchase of house * Construction of house * Renovation of house This facility is for individuals. Repayment period is 15 years for construction and purchase of house and for renovation 7 years subject to remaining service. The mark-up is SBP discounting rate 4% plus with a floor rate 15%. Total service of the applicant should be 3 years and minimum 2 years with the existing employer. no complicated procedure only the recommendation of the employer is needed.
8. TRADE FINANCE: There are two kinds of the trade finance. 1. Import related finance 57
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 2. Export related finace 1). IMPORT RELATED FINANCE: There are two types of import related finance: ⌡ Finance against trust receipt (FATR) ⌡ Finance against imported merchandise (FIM) ⌡ Payment against documents (PAD)
FATR: In this type of finance cash is involved between borrower and bank only. This type of loan is given on the basis of trust only. This type of finance is very risky, so the bank charges high interest rates. FATR finance is given to selective persons. The can put signee behind the bars without going to court after 180 days purchase good from exporter.
FIM: Importer says that he has no money and wants to import goods. Bank then opens LC and pledge all the imported goods. After arrival of goods bank allows him to take away goods as he pays to the bank and charges mark-up to the remaining balance. It is like cash financing.
PAD: If the importer does not pay with in 3 days of arrival of good then bank converts LC into funding facility and charges mark-up . 2). EXPORT RELATED FINANCE: There are two types of export finance.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 1.
FAFB (finance against foreign bills)
2.
FAPC (finance against packing credit )
2a. Pre-shipment finance 2b. Post-shipment finance
1. FAFB: This is provided in case of usance LC. The exporter discounts usance LC with bank and bank after taking cushion (check) makes payment.
2. FAPC: This type of finance is given for the packing purpose. It can be before shipment for purchasing raw material and for packing of shipment and after shipment, for giving the salary of labours and payment of raw material.
B. NON FUND BASED It is the commitment and does not involve hard cash. It is normally an obligation of the bank and in case of default of original borrower the bank stands responsible. In this type of facility bank asks the applicant for cash margin and for mortgage of property. Because even though no funds of bank involve but this facility is as risky as funded finance. But it is very lucrative for bank because no funds of bank are involved but bank charges and interest on the cash margin by head office generates revenues for bank.
TYPES OF NON_FUNDED FINANCE: There are two types of non-funded finance. 1.
Letter of credit (LC)
2.
Letter of guarantee (LG)
1. Letter of credit: 59
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT There are two types of LCs:
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INTERNSHIP REPORT
Usance LC Sight LC
Usance LC: It is the LC in which the time period is involved. Time period is 60, 120, 160, days. Bank makes the payment of LC when they received the documents, like transport receipt and invoice.
Sight LC: It is the LC, opposite to usance LC, in which payment to the exporter is made on the sight of documents.
LETTER OF GUARANTEE. Banks issue guarantees when contract is made between two parties. It requires no prime security and only collateral security is taken. The amount of guarantee to be given is calculated after valuation of assets of applicant, which he/she wants to give as collateral. 70% of total property is taken as FORCED SALE value of the assets and after taking 25 %security margin on forced sale value the guarantee is given for remaining value. Normally 25%cash margin is also taken for guarantee. This margin may vary according to the credibility of the applicant. No mark-up is charged but commission is taken. The rates for commissions are: * Up to 5million
. 4% or minimum Rs 500.
* 5m-10m
. 3%
* 10m-200m
. 25%
* over200m
.2%
* .125% is charged to Govt. and semi-Govt. Organizations
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT This commission is charged quarterly.
TYPES OF GUARANTEE Most of the guarantees are given in case of contracts. Guarantees are allowed for the purchase of fertilizers and for travailing agencies to PIA. Following are the major type of guarantees: 1. BID BOND Banks give commitment for a bid. Normally 5 % contract amount is kept as bid security to qualify bid. Now bank gives guarantee to beneficiary on behalf of applicant for this amount. If bid is accepted then contractor asks the bank for ADP. 2. ADVANCE PAYMENT GUARANTEE (ADP) Bank gives this guarantee to beneficiary to provide the contractor the advance payment because he now has to start work. 3. PERFORMANCE BOND GUARANTEE That the contractor will perform the task assigned with in the specified period of time. 4. SHIPPING GUARANTEE This type of guarantee is very rare and given it at 100 % margin.
“FOREIGN EXCHANGE” Foreign exchange is one of the important departments of ACBL. It deals with foreign currency and foreign exchange. In a foreign exchange department ACBL deals with Account opening, Withdrawal, deposits and remittance.
ACCOUNT OPENING:
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT There is two type of account opening in foreign exchange.
1.
Frozen or Old scheme accounts
2.
Incremental or New scheme accounts.
FROZEN OR OLD SCHEME ACCOUNTS: This type of accounts was frozen on 28, May 1998. In frozen accounts, account holders can withdrawal their amounts only in Pakistani currency. Account holder cannot withdrawal their amount in foreign currency.
INCREMENTAL OR NEW SCHEMEM ACCOUNTS: A new scheme was introduced by SBP for foreign currency accounts. In this new foreign currency account, account holder is allowed to open an account in foreign currency. Deposit and its withdrawal both can be done in foreign currency. There will no restoration on foreign remittance. Deposits of foreign currency are easily transfers for investment purpose. State bank of Pakistan does not charge forward coverage fee on new scheme accounts. But the SBP charges forward coverage fee on the old account because Pakistani government holds deposit in these accounts. In the ACBL foreign currency account deposits are also reported in a local currency. Foreign currency deposits are also revalued at the end of each month. Revaluation rate is announced at the end of each month.
TYPES OF SERVICES IN FOREIGN EXCHANGE: ACBL provides two types of services in foreign exchange.
_ Trade Related services 63
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT _ Travel Related services TRADE RELATED SERVICES: ACBL provides two types of trade related services.
1.
Export related
2.
Import related
EXPORT RELATED TRADE SERVICES: Export means transfer of goods and services from the home country to another country. There are four methods of payment, that is used in a export trade services.
ϕ Cash against documents collection (CAD) ϕ Foreign bill purchase ϕ Consignment sale basis ϕ Advance payment CASH AGAINST DOCUMENTS COLLECTION (CAD): In CAD there is no guarantee and liability of the bank. Bank of the exporter will send shipping document to the advising bank. Then the importer’s bank transfers the documents to the importer after the payment is received. After completing the assurance that payment has been received than the exporter’s bank makes the payment to the exporter.
FOREIGN BILL PURCHASED: In this mode of purchase importer will send LC to the advising (importer) bank. After receiving the LC the advising bank will give it to the exporter. After the shipping of
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT goods, exporter will hand-over shipping documents to negotiating bank and they will receive payment from the negotiating bank.
CONSIGNMENT SALE BASIS: In this mode of payment, payment is received within 120 days. Importer will receive the goods after paying the custom duty. The importer makes the payment when he receives the sale proceeds and after the attestation of the sale proceeds receipt from concerned embassy.
Advance payment: Advance payment means payment of the goods before they are delivered to importer. In the advance payment inward remittances are transferred from the foreign bank to the exporters account.
IMPORT RELATED TRADE SERVICES: Import is receiving goods and services from the foreign country to home country. Four modes of payment are used for imports:
1.
Cash against documents (CAD)
2.
Deferred payment
3.
Advance payment
4.
LC\ documentary credit
1. CASH AGAINST DOCUMENTS (CAD): Bank of the exporter will send shipping document to the advising bank. Then the importer’s bank transfers the documents to the importer after the payment is received. After completing the assurance that payment has been received than the exporter’s bank makes the payment to the exporter.
2. DEFERRED PAYMENT: 65
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INTERNSHIP REPORT In this mode of payment, the important thing is the mutual concern of exporter and importer. In this case the seller shipping the good and the buyer makes the payment with a mutual understanding.
3. ADVANCE PAYMENT: In this mode of payment the seller receives advance payment of his goods. The buyer can also take discount benefit for his advance payment. The seller takes the benefit through investing advance in the preparation of goods.
4. LC\ DOCUMENTARY CREDIT: LC means letter of credit. The opening bank on the behalf of the applicant writes letter of credit in the favor of beneficiary. This letter of credit is written for a specified amount against the submission of shipping documents. Applicant requests for the LC through bank, which is called LC opening, bank. In this case beneficiary is exporter and applicant is importer. Other parties of LC are: Advising bank Negotiating bank Reimbursing bank
ADVISING BANK: Advising bank is the bank of importer. Its duty is to transfer LC documents to the exporter bank.
NEGOTIATING BANK: Negotiating bank is the bank of exporter country bank. It makes the payment to the exporter for his goods, which he exports to the importer.
REIMBURSING BANK: 66
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INTERNSHIP REPORT Reimbursing bank is the foreign bank. This is a bank, which has the Nostro Accounts of the ACBL. The duty of this bank is to make the payment to the negotiating bank.
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HR Philosophy: Askari Bank has a progressive and a dynamic human resource (HR) philosophy. The Bank believes in transforming its human capital into a key source of competitive advantage. The Bank believes that investment in human capital is critical for achieving and sustaining growth.
Nature of Strategic Planning in Askari Bank Askari Bank is trying to achieve Business Level Competitive Strategy, which will help them in strengthening the business’s long-term competitive position in the market place. The Bank is using Human Resource as a strategic weapon, which will help them in achieving short term as well as long-term objectives.
Importance of Human Resource Division of Askari Bank: “Our staff is our most valuable asset” That’s why Staff is given on the job as well as site training in diverse areas of banking and management. Fifty two in house courses were organized during 2001 in Askari Bank for training the employees. 68
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INTERNSHIP REPORT The HR manager says that we are committed to provide a healthy environment, culture, job satisfaction, opportunity and compensation that attracts and retains outstanding individuals.
Askari Bank value a work place where: •
People are promoted on their merit rather than on their tenure.
•
People treat each other with mutual respect and dignity.
•
People truly feel that no matter how large we grow, each one of us can make a difference.
•
No discrimination among the male and female employees.
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HR Head’s Responsibilities; Human Resource Division of Askari Bank was successful in implementing: 1.
Staff Hospitalization Plan;
2.
Staff Transport Finance Scheme;
3.
Medical Leave of Absence Facility;
4.
Privilege Leave of Absence Encashment;
5.
Enhancement in Staff House Finance Limit;
6.
Insurance of House Finance;
7.
Increment in Salaries Up to 15%;
8.
Rationalization of Pay Scales;
9.
Performance Appraisal System;
10.
House Rent Facility.
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JOB ANALYSIS AND DESIGN: Job Analysis. Provide information about jobs currently being done and the knowledge, skills, and abilities that individuals need to perform the job adequately
Steps In Job Analysis. 1. Understand the purpose of job analysis. Managers do the job analysis and assign responsibilities according to the caliber and skill of the employee. 2. Understand the role of the job in the organization. 3. Benchmark positions. 4. Determine how to collect job analysis information Managers collect the information through Observation, technical conference. 5. Seek clarification. 6. Develop draft. 7. Review draft with supervisor
JOB DISCRIPTION, JOB SPECIFICATION
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Job Description. Service manager according to the skills capabilities personality communication skill confidence level has designed Job description.
Job Specification. Statements indicating the minimal acceptable qualifications incumbents must possess to successfully perform the essential elements of their jobs. In which includes the knowledge, skills, education, experience, certification, and abilities need to do the job effectively. Askari Bank mainly focuses on the communication and confidence level of the candidate as skill can be updated.
Recruitment is the process of searching for prospective employees and stimulating them to apply for jobs in the organization.
Objective: Askari Bank believes that by bringing together our collective expertise, insight, and professionalism, we will grow individually and succeed collectively.
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RECRUITMENT CRITERIA: if you want to work for us, and have the right capabilities and experience, our process will ensure that all candidates are provided with equal opportunities to secure a position. You are: •
Entry level fresh Induction: At this level, fresh graduates are hired normally in officer cadre of the bank ranging from OG–III to OG–I.
•
Management Trainee Officers: A special batch of qualified, energetic, high caliber and qualified young with good academic records is also hired as Management Trainee Officers (MTOs) on annual basis with an aim to nurture high-talented lot of future executives/managers for the Bank.
•
Hiring of experienced professionals: At this level, experienced and skilled professionals are hired normally for Senior Slots.
ROLE OF HRD IN RECRUITMENT PROCESS: HRD of Askari Bank is responsible for designing the selection system and managing its everyday operation.
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RECRUITMENT SOURCES: Recruitment of employees, in general the sources of recruitment can be classified into two types.
i)
Internal Job Posting: Filling a job opening from within the firm has the advantages of stimulating
preparation for possible transfer, or promotion and increasing the general level of morale.
ii)
External Job Posting: Askari Bank also goes to external sources for positions whose specification
cannot beam by present personnel. Askari Bank uses following outside sources. •
Advertising:
•
Employment Agencies:
•
Casual Applications:
•
Leasing:
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INTERNSHIP REPORT THE HIRING PROCEDURE FOR NEW/FRESH EMPLOYEES.
RECRUITMENT PROCESS (FRESH/ BATCH PROGRAMS):
SELECTION Our selection processes differ from position-to-position, and are designed to effectively match an individual’s knowledge, skills, interests, and experiences to those needed for a particular position.
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THE HIRING PROCESS: In the hiring procedure, Askari Bank is following steps to discover significant information about an applicant. 1) Call for application 2) Preliminary interview 3) Applications blank 4) Check of References 5) Psychological lest 6) Employment interview 7) Approval by the supervisor 8) Physical examinations 9) Induction or orientation
ASKARI BANK INTERVIEW ASSESSMENT FORM
Job Title:
___________
_____________
Department: ___________
Name: ___________
Trade:
Age/DOB ______________App.
Source: ___________ Place of Domicile: ___________ Available to joining No: _____________________
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INTERNSHIP REPORT Expected Salary Rs: ____________________________
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Name of the Interview:
1. (HRD Executive)
2. (Concerned Executive)
3. Supporting Executive) (1)
(2)
a) Appearance ABC
a) Assignment
Knowledge ABC a) Potential
ABC
b) Health ABC b)Experience Rating ABC
b)
Behaviour
ABC
c) Education
ABC
c) Professionalism
Observation
ABC
ABC
c)
d) Experience ABC
d) Verbal/Written
Expression ABC e) Skill
ABC
f) Confidence ABC g) Intelligence ABC Rating ABC
Final Rating:
1. Excellent:
________________
2. Good:
________________
3. Average:
________________
Merit Rating:
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4. Below Average:
________________
General Remarks:
_____________
_____________
HRD Executive Concerned Executive
_____________ Supporting Executive
ORIENTATION AND PLACEMENT Once employees are "on board" their personal growth and development overtime become a major concern. Change is a fact of an organizational life and to cope it effectively.
OBJECTIVES: The following are the objectives of orientation program of Askari Bank: 1) To make the employees comfortable 2) To get along with the workers 3) To learn them new culture of the organization
ORIENTATION OF NEW EMPLOYEES
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INTERNSHIP REPORT After the selection of successful employees the first step in their introduction to bank policies, practices and benefits is an orientation program. The Orientation program in Askari Bank is completed in three phases.
FIRST PHASE: The first phase is usually conducted by the staff personnel unit. Subjects covered include products of the bank, employee benefits, salary schedules, safety, probationary period, timed recording and absence, holidays equal employment opportunity programs, packing and the grievance procedure.
SECOND PHASE: The second phase of most organized induction program is performed by the immediate supervisor. The inductee is introduced to fellow employees, given a tour of the department, and informed about such details as locker and rest rooms, supply procedures, hours of work overtime, call in procedures, rest and lunch periods, and lunching facilities. THIRD PHASE: The complete in action program will provide for phase three follow up some week later. The interview, conducted by either the supervisor or a personnel specialist is concerned with 1)
Employee satisfaction with the job and organization.
2)
Supervisor satisfaction with the employees.
PLACEMENT: In Askari Bank Placement means
“Right person for a right job” A lot of applicants’ abilities are matched with a specific job requirement and then that person is placed on that position.
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TRAINING AND DEVELOPMENT After the employee has been received, selected and inducted, he or she must next be developed to better fit the job and the organization.
INVESTMENT IN THEIR ASSETS: Askari Bank is a multinational organization in which importance has been given to training. The management considers the training as an "Investment in their Asset".
OBJECTIVE: The objectives of training and development programs are to enhance and improve the capabilities, efficiency, and productivity of an employee up to the desired standards for current and future assignments and responsibilities. We have our own specialized in-house training facilities in the shape of Training Academies at Rawalpindi and Lahore.
AREAS OF TRAINNING: The Training Academies of the Bank are equipped with modern state of the art facilities and are responsible for imparting multi-functional high quality trainings to all staff members in the following areas: 81
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INTERNSHIP REPORT s •Business
Development Customer Service Liabilities Management Asset Development Consumer Finance
» » » »
•Commercial
Banking General Banking Foreign Trade Credit Management
» » »
•Credit Administration •Risk Management •Consumer Banking •Soft Skills
» » » » »
Effective Communication Skills Negotiation Skills Team Building Selling Skill Customer Care etc.
The employees of Askari Bank are also sent to attend specialized courses by various banking /non-banking training institutes.
TRAINING NEEDS ASSESSMENTS: In Askari Bank there are three level of analysis for determining the needs training can fulfill. 1.
Organization analysis: Focuses on identifying where within the organization training is needed.
2.
Operation analysis: Attempts to identify the content of training - what an employee must do to
perform competently. 3.
Individual Analysis:
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INTERNSHIP REPORT Determines how well each employee is performing the tasks that make up his or her job. At this level, training needs may be defined in terms of a simple equation. Desired performance - Actual Performance = Training need.
OPERATIVE TRAINING: The development of operative calls for specific increased in skills and knowledge to perform a particular job. In Askari Bank there is primarily two basic methods in use. 1)
On The Job Training: Since most jobs in Askari Bank can be learned in a relatively short period of time,
this method is most widely used. The type of on the job training implemented in Askari Bank is:
Apprenticeship program which include both classroom instructions as well as on the job training. This type of training is given to the new inductees and usually two years long. 2)
Off the Job Training:
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INTERNSHIP REPORT There are following methods used in Askari Bank for Off the Job training. i)
Staff Training Program:
ii)
Special Courses:
iii)
Selling and Technical skills training program:
iv)
Opportunities For Improvement Of Educational And Technical Qualification:
EVALUATING TRAINING PROGRAMS: To assess the utility or value of training, in Askari Bank management seek ensures to four questions. 1.
Did change occur?
2.
Is the change due to training?
3.
Is the change positively related to the achievement of organizational goals?
4.
Will similar change occur with new participants in the same training programs?
MEASURES OF CHANGE: In evaluating training programs, measures of change fall into four categories. Reaction: How do participants feel about the training program? Learning: To what extent have trainees learned what was taught? Behavior: What on the job changes in behavior occur because of attendance at the training program? Results: Is what extent have cost related behavior outcomes or quality improvement, turn over or accident reduction (productivity) resulted from the training.
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INTERNSHIP REPORT DEVELOPMENT: We also focus on providing opportunities and facilitating our executives and officers for developing their managerial and leadership skills through management development programs for present and future responsibilities.
PERFORMANCE APPRAISEL Definition: It is a formal process and structured process through which management measures, evaluates and assesses job related attitudes behavior and out comes.
Importance of performance appraisal in Askari Bank: •
It identifies employees current job i.e. what is he doing?
•
It will help in identifying in weak and strength points.
•
It will help an employee to improve his or her performance.
•
Organization compensation and rewards are all based on performance appraisal.
•
It motivates the individual to face constructive criticism when there is negative performance appraisal.
•
It also helps in assessing in training and development needs.
•
It helps in documenting the HR policies.
•
It helps in decision making of retention and termination.
•
It is important for promotion, transfer and termination.
Method used in Askari Bank for performance appraisal: A special document is used for performance appraisal in Askari Bank, which is known as GDD (grade development document) Following are the main things, which are included in document. 85
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•
Assignments
•
Job duties
•
Achievements
•
Audit objectives
•
Complaints
These things are discussed in document with regard to performance of employee. Performance appraisal is done on annually basis.
Some other methods of performance appraisal normally used in Askari Bank: •
Written essay:
Here you write the employee weak and strong points, future potential and past achievement and area for improvement. •
Critical incident method:
Here the appraisal based on those factors which are very effective and the events where your performance was efficient
Problems with the appraisal: There is no specific problem is faced in performance appraisal
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JOB EVALUTON Definition: It is a process by which the relative worth of various jobs is determined for pay purpose. It checks the out the amount of employee’s pay or salary to the contribution made by this job. The job is evaluated according to its importance. JOB EVALUATION: The process of job evaluation involves assessing the relative dollar-worth of each job to the organization to set up internally equitable pay structures. If pay structures are not equitable, employees will be dissatisfied and quite, or they will not see the benefits of striving for promotions. To put dollar values on jobs, it is necessary to get information about different jobs to determine which jobs deserve higher pay than others.
Job Evaluation. Askari Bank do job evaluations with the help of •
Manager Analysis
•
Mystery shopping
•
Quizzes/Snaps
•
Exit interviews 87
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INTERNSHIP REPORT •
Curiously calls
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Training
•
Attitude
•
Relations with Customer and Employee
•
Targets
Specifies the relative value of each job in the organization.
HEALTH, SAFETY & WELFARE SAFETY AWARENESS: The employees are given a physical environment that is comfortable and healthy. In summer there is adequate air-conditioning and in winter there is central heating. Since Askari Bank is handling with services and there is no potential danger in the nature of its business, hence the only thing that the HR management needs to ensure a healthy environment.
HEALTH AND SAFETY: A monthly health and safety meeting held at Askari Bank. Chief Manager presides this meeting and discuss any accident if happen in preceding month. Measures in future to avoid these types of accidents. Working hours
=
48 hours per week.
Sick leave
=
8 days
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INTERNSHIP REPORT Casual leave
=
10 days
90
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INTERNSHIP REPORT FEATURES OF COMPENSATION SYSTEM AND SOCIAL SERVICES: *
Fixed salary
*
Overtime is paid according to Government rules and regulations i.e. double on holidays.
*
Group Insurance scheme is practiced for the compensation of two objectives: i)
Accidents
ii)
Injuries
*
Employees old age benefit scheme.
*
Gratuity scheme.
*
Bonus is awarded (Minimum one bonus in a year)
*
Monthly Medical Allowance
*
Social Security services are obtained for employees.
HEALTH SERVICES: Following are included in the health services of Askari Bank: •
Adequate facilities for emergency
•
Pre-employment medical examinations
•
Reasonable first aid to employees for non-occupational illness while on the job.
•
Information and education services for the personal health of employees
•
Advice and supervision, where necessary, to maintain proper company sanitation.
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COLLECTIVE BARGAINING It is a process to determine the terms and conditions of employment and regulating employment relationship, which utilizes the process of negotiation between representative of management and employees intending to result in an agreement, which may be applied across the group of employees.
Terms of Employment: The following are four categories of employment in Askari Bank Limited; 1.
Regular Employment;
2.
Probationer Employment;
3.
Contractual Employment;
4.
Temporary Employment; and
5.
Casual Employment.
Regular Employment: These are the employees, which are after the final selection employed for a regular period. These employees enjoy all the benefits such as annual gratuity fund, Retirement benefit and after the retirement, pension etc. Usually managers and supervisors fall in this category.
Probationer Employment: When an employee is selected for some post, he or she undergo for the probation period of 6 months normally. However for the management cadre, it can be less than 6 months. When the probation period is completed, the employee signs a contract with 92
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INTERNSHIP REPORT personnel manager. Contractual Terms: There are three major considerations;
Employment is temporary in nature.
The person should be of age 60 or above.
Duration of employment contract is one year and renewable.
When the bank management feels that the person retiring from the job have enough capabilities and potential to work more in the benefit of the organization, then sign this type of agreement with the retired employee. Employee form the top to bottom can be included in this type of employment terms.
Temporary Workers: Employees of cadre of workers and supervisors are hired for a period of 6-9 months according to government rules on temporary terms of employment.
Casual Workers: It is concerned with the daily wages workers. When the company requires the workers urgently, they employ the casual worker to fill the vacancies.
Apprenticeship Training: According to government regulation, Banks have to hire the apprentices against the regular scheme. Askari Bank is not bound to give regular jobs to the apprentice trainees.
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GRIEVANCES DEFINITION: Grievance is any dissatisfaction or feeling of injustice in connection with one’s employment situation that is brought to the attention of management.
HANDLING CONFLICT SITUATION: Obvious sources of conflict range from a difference of opinion, problematic working conditions or unrealistic work expectations through discriminatory behavior, to poor communication or non-compliance with organization norms or values. Conflict can be covert and take the form of resentment or irritation. Such conflict is much harder to detect and easier to ignore.
ADVANTAGES OF MANAGING CONFLICTS: Advantages of managing conflict situations for the Askari Bank management are: •
Better motivated staff; staff energies are directed to work rather than emotions
•
An organization or staff that presents a positive name to the outside world
•
Improved team work
•
Better personal development of individuals
DIFFERENT TYPES OF DISPUTES IN ORGANIZATION: There are some signs of disaffection with organization such as strikes, confrontation leading to lockouts and various forms of withdrawal of cooperation by staff in furthermore of their claims. And other conflicts such as poor training, turnover, and 94
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INTERNSHIP REPORT absenteeism. To solve all disputes Askari Bank, management take action which are very right and then all the employees are happy ad are more committed to their work.
ROLE OF HRD IN SOLVING PROBLEMS: HRD performs following chief roles. •
Supportive behavior on manager's part.
•
A work group problem solving.
•
To design job techniques in such a way that gives satisfaction for individual and opportunity for improving performance.
•
Letting everyone to have his or her say.
DISCIPLINE DEFINATION: Discipline is condition where employees know that what is expected from them and what will be the consequences of violation.
Purpose of discipline in Askari Bank: Following are the main purposes of discipline in Askari Bank: •
To enforce rules and regulations 95
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Smooth running of organization.
•
To ensure efficiency of workers.
•
To improve work relations.
CAREER DEVELOPMENT Askari Bank values performances. We have introduced an objective system of performance evaluation based on Management by Objectives and Behavioral Competencies. The system allows for mid-year reviews and is 100% open to appraisees.
CAREER PLANNING: It entails matching an individual’s skills and aspirations with opportunities that are or may become available in the organization. This matching process requires that those in charge of career planning know the skill requirements of the various jobs. This allows them to guide individuals into jobs in which they will succeed and be satisfied.
CAREER DEVELOPMENT IN ASKARI BANK: Askari Bank Limited is one of the most progressive institutions in the country today. Currently, Askari Bank is pursuing an ambitious expansion strategy, which envisions opening a large number of branches throughout the country.
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INTERNSHIP REPORT Askari Bank, besides being the most rapidly expanding Bank in the market, is also the choice of many career-focused individuals since it offers some of the following benefits:
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•
Stability of Career
•
Tremendous Growth Opportunities
•
Extensive Training & Development Program
•
Motivating Work Environment
•
Attractive Salary Packages
•
Nurturing Culture
MANPOWER PLANNING Askari Bank has a progressive and a dynamic human resource (HR) philosophy. The Bank believes in transforming its human capital into a key source of competitive advantage for that they believe in human resource planning.
BASIC PURPOSE: In Askari Bank basic purpose for which HRD in relation to HRP serves are as under:
1.
Balancing the cost between utilization of plant & manpower: This theme involves comparing costs of these two resources in different
combinations and selecting the optimum.
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Determining recruitment needs:
It is an essential prerequisite to the process of recruitment. It means that HRD unexpected shortages, wastage, blockages of unexpected shortages, wastage, blockages in promotion flow and needless redundancies.
3.
Determining training needs:
HRD plans fundamental training programmes for which it is necessary to assess not only quantity but also quality in terms of the skills required by Askari Bank.
4.
Management Development: HRD provides succession of trained and experienced manager that is essential to
the effectiveness of the organization and this depends on accurate information about present and future requirements in all management level in Askari Bank.
A system of HRP in Askari Bank: A system of HRP in Askari Bank has some specific points on which Banking Act. 1.
Defining or redefining organizational objectives.
2.
Determining and implementing the basic requirement to sound planning.
3.
Assessing future requirements to meet objectives.
4.
Assessing current resources and availability of resources in the future.
5.
Monitoring system and amending as indicated.
REASONS FOR HUMAN RESOURCE PLANNING Following are specific reasons for which Askari Bank management is carrying on systematic human resource planning. 1)
Future Personnel Needs:
2)
Coping with Change:
3)
High-Talent Personnel:
4)
Strategic Planning:
5)
Equal Employment Opportunity: 99
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Foundation for Personnel Functions:
THE PLANNING PROCESS: Planning for human resources is tied in with overall Askari Bank long range planning. The process of planning in itself forces management to think through objectives of firm and people problem relating to achieving those objectives through planning.
1)
GOALS AND PLANS OF ORGANIZATION: Human resource planning is a part of overall strategic planning for Askari Bank. A
personnel vice-president and his staff cannot make useful plans for period of one or three or five years, unless they have data on possible corporate expansions new products, new plants, new markets and so on.
IMPORTANT STEPS: Important steps involved in overall planning for Askari Bank are: 1.
To analyze and evaluate environmental influence. a)
Political trends and legislation which will have impact upon the business.
b)
Social trends in leisure time, consumer tastes, work values and retirement.
c)
Technological advances affecting enterprise.
2.
To identify the values and aspirations of Askari Bank's directors and executive.
3.
To identify and evaluate the internal strengths and weaknesses of the enterprise.
4.
To create specific enterprise objectives and plans for achieving these objectives.
5.
To evaluate progress toward implementation of plans and take corrective action where necessary.
PLANNING PERIOD: Askari Bank's planning period is from 3 years to 5 years. Period for three year is short range and of five years is long-range period.
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2)
CURRENT HUMAN RESOURCE SITUATION: The second phase of the planning process for Askari Bank is the preparation of an
inventory of personnel presently within the organization. A skill inventory consists of upto date information regarding the qualifications of the selected categories of personnel.
IMPORTANT USES OF SKILL INVENTORY: The skills inventory has several important uses. 1)
After preparing human resource forecast, Askari Bank compare, the number, types and skills specified by forecast with the present baseline or current position given by skill inventories to ascertain what skills must be developed from present personnel via training, up grading and special development efforts.
2.
Other use is to identify talent within the organization for specific job opening.
3.
An up to date skill inventory is valuable for the preparation of rosters of qualified technical and managerial personnel.
COMPUTERIZED SYSTEM: Askari Bank along with manually prepared Human Resource Data cards also use computerized system to handle data. The computer can readily provide a printout of the age distribution of all mangers by level, job, and department.
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TRANSFERS, PROMOTIONS AND SEPARATION TRANSFERS: The Headquarters of all employees as mentioned in the letter of appointment is subject to change at the discretion of the Management in which event an employee will be required to work anywhere in Pakistan as Headquarters with no extra remuneration and /or allowance or compensation whatsoever in the salary structure. In case of a transfer, an employee will be entitled to the following transfer benefits: I)
Air-conditioned Coach train fare or air passage as per entitlement for himself and his immediate family to the place of transfer will be provided.
II)
14 days upcountry allowance (Boarding & Lodging allowance) as per entitlement in the traveling scheme will be provided. For single employees, reimbursement is at a flat rate. The amount allowed will be
specified in the transfer letter served by the Management. In cases where the Management has initiated the move, it can at its discretion, allow a higher ceiling/additional benefits. Transfers are also being done within the city and outside the city. The purpose is to provide employees a better chance to excel in their area at different locations and in different bank branches. Job rotation is also being done. Traveling and transfer allowances are also given so that employees get settled as soon as they join the duty.
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Promotion: Promotions are an integral part of the job. Every employee is looking forward towards its career path. In Askari Bank the promotions are given on the basis of superior performances. The promotion occurs both in the ranks and in the salary structure.
SEPARATION OF SERVICE: a) An employee's service can be terminated on three months notice in case of a manager or level above that and one month's notice in case of a junior Officer, Senior Officer and Assistant Manager or pay in lieu thereof b) If in the course of an employee's service, the employee suffers from any serious ailment or permanent disability of any kind which in the opinion of the management may or is likely to interfere with the due performance of duties, the employee's service may be terminated at the discretion of the management by giving notice as mentioned above, or payment in lieu thereof as the bank may deem fit.
SALARY AND INCENTIVES Salary: Askari Bank tries it best to keep the staff fully satisfied and provide them with perfect career paths. The employees are paid well so that they can maintain reasonably decent living and are motivated to work as bank’s employees. The employee compensation at Askari Bank caters both 103
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INTERNSHIP REPORT “Direct financial payments” “ Indirect financial payments”. The pay scale is determined on the commendable factors and on the decision-making ability for the managers and executives.
Allowances: Which are given to employees other than the basic pay, are as follows: House Rent Allowance. Utilities Allowance Technical allowance. Traveling Allowance and Daily allowance.
Fringe Benefits: In Askari Bank, following benefits are offered to the employees. Medical Facility. Facilities at residence. Grants of incentives for improving qualification every year. Cash prizes. Increments (Annual increase in pay) Bonuses.
Indirect Compensations: Askari Bank offers three types of indirect compensation to its workers. Employee insurance scheme Providing funds Gratuity scheme. department shall initiate the case to P & A.
Pay Plans and Incentives at Askari: -
104
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Establishing Pay Rates: For establishing the pay rates, first step is to conduct the salary surveys.
The Salary Surveys: For the purpose of conducting salary survey, Askari Bank is taking help of The Ferguson firm, which conducts surveys and researches in the field of marketing and finance. Moreover, the bank’s managers are well informed about the pay and salary structure for the candidates to be hired in case of hiring. This external survey is conducted once in two years. Complete documented information is being delivered to the bank so that the pay scales do not vary from the market rates.
Job Evaluation: Evaluation of the job performance is done yearly. The purpose is to see and identify the employees who have done their respective work well through out the year considered and who have not been able to show good performances. . Pay Plan at Askari: Pay plans at Askari are established on the basis of job rating. All jobs are ranked from top to bottom, on the basis of commendable factors. Employee with higher rank gets higher salaries and incentives. Askari Bank has its own criteria for establishing pay rates. . HR manager believes that competency and skill based pay can increase motivation and employee commitment. But more often employees are paid on the basis of their jobs. Their pay is based on job or skills.
Skill Based Pay: Skill based pay is given to employees for the recognition of their knowledge, decision making, problem solving abilities and competency of efficient and effective working in their jobs.
Variable Pay: 105
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Variable pay is a group incentive plan that ties pay to some measure of an organization’s overall profitability. When the bank performs or the branch of the bank
106
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT performs spectacularly in terms of profitability for a particular year, the whole branch is given a variable pay.
Compensation Plan: Compensation plan for Askari employees involves following things;
Basic Salary;
Bonuses;
Allowances;
Reimbursements;
Short term Incentives;
Long term Incentives.
Basic salary involves fixed compensation paid regularly. Bonus is given two times in a year to managers and professional employees, percentage of which lies from 80% to 100%. Allowances and reimbursements are short-term incentives. Askari Bank has also several incentive plans, including individual performance awards and bonuses, team awards.
Incentives for the Employees at Askari: Employees at Askari are paid basic salary as well as some sort of short and longterm incentives. Individual incentive programs are launched at Askari to give income over and above basic pay to individual employees who meet specific individual performance standards.
Incentives for Managers and Executives: Managers and executives play a central role in influencing divisional and corporate profitability. Askari Bank Limited puts considerable attention towards their rewards. Most managers get short bonuses and long-term incentives in addition to salary.
107
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Askari Bank offers stock option to its managers as the long-term incentives. The purpose of stock option is to motivate and reward management of the bank for long term corporate growth, prosperity and shareholder value.
Bonus: Along with the basic salary, bonuses are given to managers two times in a year. The percentage of bonus is 80% and sometimes 100% to their pay.
Allowances: House rent and Utility allowance are also given to managers. Managers are paid 42.5% and 10% of their incremental pay as house rent and utilities allowance respectively. 10% of the salary is given to as medical facility, and for the general utilities like telephone 10% of the salary is also being given to the utilities. So the overall salary comes to a higher level including all these cash and other benefits.
Reimbursements: Reimbursements for medical, telephone and petrol expenses are also given to managers and executives.
Incentives for middle and lower level Employees: Middle level employees and professionals are also paid bonus, allowances, and reimbursements along with their basic pay. Lower level employees like peon, driver, and technicians are paid dearness allowance, house rent allowance and medical allowance along with their basic salary. The incremental stages for these employees are +30, where as others have +25 stages in their jobs.
Ensuring Accuracy & Authorization: The following payments shall be made in the routine, with such additional payments as the management may direct from time to time:
108
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Medical Reimbursement: Medical reimbursements are made to staff and executives of the bank according to the bills presented by them. What to be done and how to reimburse the medical expenditure is shown in the required action section.
Claims for Traveling allowance and Daily allowance: -(TA,DA) Allowances are given to the employees for the traveling of the executives from one city to another or abroad, all the expenditure is on the bank, daily expenditure can also be recovered through claims.
Fuel and Lubricants: The bank also provides free traveling facilities to its employees by paying amount against the consumption of fuel dependent upon their respective ranks. It is of two types; 1.
Reimbursement to executives;
2.
Official Expenditure.
Office Expenditure: PTCL connections. Corporate connections Mobile phones and connections Reimbursements to executives.
Salary Disbursement: Payments to regular staff Payments to contractual staff Arrears payments Bonus payments.
Insurance: Life insurance and car insurance are some of the benefits, which are also given to the employees and more precisely to the managers and to the executives. 109
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
BENEFITS AND SERVICES OF ASKARI BANK LEAVE: ENTITLEMENTS & RULES CONFIRMED EMPLOYEES All confirmed employees are entitled to leave according to the rules and regulations stated below: i.
CASUAL LEAVE Ten days with pay in a calendar year, at the discretion of the Management. Casual leave is meant to meet urgent and/or unforeseen circumstances. Prior
approval of the Management has to be obtained whenever possible, stating the reason for leave. a)
Casual leave may be allowed to be availed at one time for a maximum of 3 days and shall not normally be combined with any other leave, holidays and /or public holidays.
b)
Causal leave shall not be accumulated and carried forward beyond a calendar year.
c)
Casual leave may be allowed in continuation of Sick Leave in cases where the Doctor recommends sick leave is exhausted and further leave.
ii.
SICK LEAVE
110
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The entitlement is 14 calendar days in a year. Sick leave if not availed during a calendar year may be carried forward but the total accumulation of Sick leave shall not exceed 28 days at any time.
111
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT a)
Any application for sick Leave which exceeds 3 days should be supported by a medical certificate from a registered practitioner.
b)
The management may at its discretion have any employee examined by the bank Doctor and the advice of the Doctor shall be final, for the purpose of granting leave to the employee.
c)
If sick Leave is availed on Thursday and also on the following Sunday, such leave will be counted for four days and a medical Certificate should accompany the leave application.
d)
In case of prolonged illness, where the required leave exceeds the entitlement, the adjustment of leave beyond entitlement may be made against C/L or P/L, or be granted as a special sick Leave at the discretion of the Management.
iii.
PRIVILEGE LEAVE The P/L entitlement for all employees is as follow:
For the 1st completed year of service 3 weeks (21 Calendar days). For 2nd to 5th completed year of service or part thereof 4 weeks (28 Calendar days). For 6th year onwards- 5 weeks (35 Calendar days) a)
An application for P/L shall be submitted to the Human Resource Division duly recommended by the concerned Superior, a minimum of 14 days before commencement of leave.
b)
A minimum of 2 weeks P/L pertaining to one year has to be availed in order to receive Leave fare Assistance for the year. According to the profit of the bank, the Management could allow a maximum of 1 month’s basic salary as LFA subject to approval. However, as minimum LFA, a fixed amount will be paid.
c)
Leave will always be adjusted first against any remaining balance of a previous year before being adjusted against the current year's entitlement.
112
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT d)
Prefix and suffix of weekly/gazette/other holidays to Privilege Leave will be allowed and as such will not be counted as Privilege Leave. However, should any holiday fall during the leave, it will be counted as Privilege Leave.
e)
The management reserves the right to refuse any leave if the exigencies of business so require.
iv.
MATERNITY LEAVE Maternity Leave will be allowed to the concerned employee for a period of 12
weeks (85 Calendar days) for each case. Application for the period of leave should be submitted well in advance.
PROBATIONARY EMPLOYEES During the probationary period of any employee there will be no entitlement to any kind of leave, be it Casual Leave, Sick Leave, Privilege Leave or Maternity Leave. Sick Leave if required, will be approved as a very special case only if supported by a Medical Certificate from a registered medical practitioner. Any other leave if availed, will be treated as without pay. However, on confirmation if the employee so desires, the leave may be adjusted against his entitlement and the deducted amount refunded.
LOAN POLICY The bank guarantees loans for car and scooter/ motorcycle. 1.
Application under the Loan Policy, which is duly recommended by the concerned Division/Department Head, should be forwarded to Human Resource Division for processing. Applications will be approved subject to availability of Funds at the concerned Banks.
2.
As per the Bank's Policy for financing loans, the vehicle should be jointly registered in the name of the Bank and employee.
3.
All employees will also have to take out a comprehensive insurance policy for the vehicle in order to avoid monetary loss in case of accidents. 113
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT These are normally given to employees involved in actual sales only.
CAR LOAN FACILITY The bank has decided to adopt a policy for granting bank guaranteed loans for purchase of a car to all assistant managers irrespective of whether they are involved in sales. In case a mileage is sanctioned the pick & drop facility presently enjoyed at the Head Office and regional or zonal office will be withdrawn. This fund will be an interest bearing fund and the rate of interest will be 12% per annum.
TRAVELING SCHEME: All official arrangements for employees whether at Karachi or upcountry will be made after prior approval. The concerned employee keeping in mind, the entitlement and the length of stay planned may also take a traveling advance. For this purpose an advance form may be filled in, recommended by the Division/Department Head and forwarded to Human Resource Division for approval.
Breakup of Boarding Allowance: Breakup 15%, Lunch and dinner 30%, each Misc. 25%. a)
100% Boarding will be allowed in case if absence from the Headquarters for 12 hours or more.
b)
50% boarding will be allowed in case of absence from the Headquarters for 6 to 12 hours.
114
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT FOREIGN TRAVEL In case of foreign travel, rules and regulations of the State Bank of Pakistan will apply. Claims can be made according to the Daily allowance prescribed for different countries by our principals. The concerned Division regarding any planned visit abroad by any employee should inform the administration division and Human Resource Division. The bank will make all official travel arrangements and a traveling advance may also be taken and substantiated as mentioned above.
MATERNITY 90% of maternity bill will be reimbursed, up to a maximum expenses limit under this head or one basic salary, which ever is HOSPITALIZATION In those cases where admittance to hospital is required total hospitalization expenses, which include Doctor's fees, X-Ray charges, Medicines, Laboratory charges etc. will be reimbursed by the bank at its description against proper receipts. No payment will be made for nursing charges, diet charges or any non-medical items.
INSURANCE PLAN The bank has made arrangements to provide adequate 24 hour insurance coverage of all its employees in case of death or permanent disability while at work or traveling or at home.
i.
PERSONAL ACCIDENT POLICY
In the case of death of an injured employee, the bank will pay the amount received from the insurance bank to the employees’ nominated beneficiary. The benefits of this plan with the limits of Compensation are as follows: 1.
Death only
100% of sum insured
115
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT GENERAL The bank reserves the right to refer any person to the bank Doctor as and when deemed necessary to scrutinize all medical bills and to reject payment of factious bills, if any. Any misuse of the medical scheme by an eligible employee would be liable to strict disciplinary action.
Medical Expenses Under this plan employees are covered for the medical expenses incurred on account of hospitalization and treatment, resulting due to accidents only, for a maximum period of 52 weeks after the date of the accident. Under this policy it is necessary to report an accident to the insurance bank immediately followed by the claim forms which are filled in to substantiate the claim. All employees
must
therefore
report
any
such
accident
immediately
to
their
Division/Department, with a copy to H.R.D. within 24 hours. ii.
GROUP LIFE INSURANCE POLICY All confirmed employees are also covered under this policy. If an employee dies,
while insured under this policy, the insurance bank will subject to provisions of the policy, immediately upon receipt of due proof in writhing of the death of the employee, pay the amount for which the employee is insured, which will be paid by the bank on receipt from the insurance bank to the nominated beneficiary. This is in addition to the accident insurance. 2.
Permanent disablement:
i)
Permanent total loss 100% of sum insured of both eyes or of two limbs.
ii)
Permanent total loss 75% of sum insured of one eye and of one limbs.
iii)
Permanent total loss 50% of sum insured of one eye of one limb.
iv)
Permanent total 10% of sum insured of the finger or thumb.
116
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
HR AUDIT DEFINATION: HR Audit is related to examine that how HR Managers are performing their HR responsibilities.
APPROACHES TO HR AUDIT: There are five types of HR Audit that are •
Comparison Approach
•
Outside Authority Approach
•
Statistical Approach
•
Compliance Approach
•
MBO Approach
Askari Bank used comparison approach for audit purpose.
TOOLS FOR HR AUDIT: The following are tools of HR Audit. •
Interviews
•
Surveys/ Questionnaires
•
Historical Analysis
•
Grievance Audit
•
Compensation Audit
117
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Askari Bank used each tool of HR Audit for audit purpose but mostly used that tool which suits to the environment of their organization.
118
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT SUGGESTIONS BY EMPLOYEES Suggestions are always encouraged but no extra award or recognition is given to the employees if the suggestion or a creative idea benefits the organization in terms of reduced cost, increase in profit etc.
CONCLUSION In this competitive environment, where Askari Bank is facing tough competition with other multi national companies, HRD has been successful in retaining its employees by offering a clearly defined reward and incentive system.
119
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
120
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
BALANCE SHEET AS ON DEC.31 2006 ASSETS:
2006
Cash and balances with treasury bank
8,762,866
6,678,026
Balances with other banks
4,847,899
2,650,166
Lending to financial institutions
2,324,839
5,770,842
Investments
17,239,157
22,104,425
Advances
69,938,041
44,777,538
Other assets
1,459,716
1,425,986
Operating fixed assets
2,595,023
1,979,919
107,167,541
85,386,902
1,227,093
973,703
Borrowing from financial institution
13,781,555
15,903,055
Deposits and other accounts Sub-ordinated loans
83,381,795 1,000,000
61,656,607
14,159 1,282,981
37,350 962,592
526,865
806,753
101,151,448
80,340,060
6,016,093
5,046,842
Head office capital accounts
1,255,848
1,141,680
Capital reserve
4,317,301
2,759,599
5,573,149
3,901,279
442,944
1,145,563
6,016,093
5,046,842
2005
LIABILITIES: Bills payable
Liabilities against assets subject to finance lease Other liabilities Deferred Tax Liabilities
Net Assets Represented by:
Un remitted profits Surplus on revaluation of securities-net of tax
ASKARI COMMERCIAL BANK LIMITED 121
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT PROFIT AND LOSS ACCOUNT Mark-up/return / interest earned Mark-up/return / interest expensed Net mark-up / interest income Provision against non performing loans and advances Provision for diminution in the value of investments Bad debts written off directly Net mark-up / interest income after provisions NON MARK- UP/ INTEREST INCOME Fee, commission and brokerage income Dividend income Income from dealing foreign currencies Other income Total non mark-up / interest income NON MARK-UP / INTEREST INCOME Administrative expense Other provisions / write offs Other charges Total non mark-up / interest expense Extra ordinary unusual items PROFIT BEFORE TAXATION Taxation – Current Prior years Deferred Profit after Taxation Inappropriate profit brought forward Profit available for appropriation APPROPRIATIONS: Transfer to: Statutory reserves Capital reserves (reserves for the issue of bonus shares) Revenues Reserves Proposed cash dividend Un-appropriated profit carried forward Basic earning per share - (Rupees) 122
(Rupees in thousand) 4,487,206 4,073,715 1,117,206 1,379,609 3,370,000 2,694,106 277,398 308,528 38,066 7 315,471 308,528 3,054,529 2,385,578 649,988 26,318 180,992 776,230 1,633,528 4,688,057
524,775 37,658 112,808 278,512 953,753 3,339,331
1,845,179 138 1,845,317 2,842,740 2,842,740 876,089 43,611 919,700 1,923,040 1,923,040
1,436,304 1,227 1,437,531 1,901,800 1,901,800 873,639 (74,904) 798,735 1,103,065 1,103,065
384,608 251,170 1,036,092 251,170 1,923,040 15.31
220,613 114,168 539,948 228,336 1,103,065 8.78
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2006
TREND ANALYSIS
(Horizontal Analysis) FINANCIAL SUMMARY
Trend Analysis, also called Horizontal Analysis of the financial statements is one directional- upward or downward analysis and involves the computation of the percentage relationship that each statement item bears to the same item in the base year
Profitability Total Income Interest income Interest exp Fee, comm. Exch.Income Other income Spread Operating expenses Operating Profit Non performing assets Profit b/f tax Taxation Profit after taxation
2002 2003 2004 2005 2006 (Rs in million) 3840 3213 2274
5047 4251 2902
5704 4858 3017
5028 4074 1380
6121 4487 1117
506
677
299
638
831
122 939 680 886
119 1349 854 1291
247 1841 1093 1595
317 2694 1438 2210
802 3370 1845 3158
134
283
351
308
315
752 436 316
1008 458 551
1244 557 687
1902 799 1103
2843 920 1923
123
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
The operating expenses of the bank has been increased with sharp margin, the ACBL is newly born bank of only 14 years old and is growing rapidly so, we can say that the reason behind the rapid increase of its operating expenses may be the expansion of business. In order to get handsome profit the expenses are necessary as it is shown by the fact that if the bank’s operating expenses have been increased then, there is also an increase in the profit before income tax and profit after income tax.
SHAREHOLDER’S FUNDS 2002 Shareholder’s
fund Share capital Reserves Surplus on ROA
2004
2005
2006
(Rs in million)
Funds Total share holders
2003
2155
2579
4173
5047
6016
986 1229 (60)
1036 1521 22
1087 1940 1146
1142 2760 1145
1256 4317 443
124
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
TREND ANALYSIS 2002
2003
Shareholder’s
fund Share capital Reserves
2005
2006
%AGE
Funds Total share holders
2004
100
119.6
193.6
100 100
105.0 123.7
110.2 157.8
234.2 115.8 224.6
279.2 127.4 351.2
The shareholder’s fund of the bank is continuously increasing, as the bank is running on profit, therefore, the business take interest in this project and wish to participate in it. The bank’s share capital and reserves are also increasing with the expansion of business.
LIABILITIES
125
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 2002
2003
30360
41200
51732
61657
83319
2882
3222
3392
7329
9777
-
-
-
-
1000
11016
11354
7055
Liabilities Customers deposits Refinance borrowings Sub-ordinated loans Other liabilities
3058
3980
2004 2005 (Rs. in million)
2006
126
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
TREND ANALYSIS 2002 Liabilities
Customers deposits Refinance borrowings Other liabilities
2003
2004
2005
2006
PERCENTAGE
100
135.7
170.4
203.0
274.4
100
111.7
117.7
254.3
340.0
360.2
371.3
230.7
100
130.1
New if we analyze the liability side of the bank we see that the bank’s deposits are going on increasing since its birth which is a very healthy sign for the bank as the bank’s basic business is to deal in money. The increase in deposits show that the people have interest in the bank and deposit their fund in the bank without any hesitation. However it has not been mentioned here that how many of the deposit are current and how many of them
127
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT have fixed nature but we can say that it is a very important source of the bank to earn profit. As the banks usually earn through interest or mark ups imposed on the deposits they keep with themselves.
ASSETS 2002
2003
Advances
17893
23292
30035
44778
69938
Investments Cash, short funds and
8651
11706
26737
22104
17239
statutory deposits with
10056
13436
10061
15099
15936
Assets
2004 2006 (Rs. in million)
2007
SBP Operating fixed assets
641
723
1663
1980
2595
Other assets
1213
1824
1817
1426
1460
Total assets
38454
50980
70313
85387
107168
Now we will discuss the assets side of the bank. The liquidity position is essentially important for the bank, as it must have all the time sufficient funds to meet the demands for the money that may be made on it. It is the protection against the risk that losses may develop if banks are forced to sell or liquidate creditworthy assets in an adverse market. The current liquidity position of the bank has improved as indicated by the percentages shown in the table below.
TREND ANALYSIS
128
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 2002
2003
Advances
100
130.2
167.8
250.2
390.9
Investments Cash, short funds and
100
135.3
309.1
255.5
199.3
statutory deposits with
100
100.0
150.1
158.4
Assets
133.6
2004 2005 (Rs. in million)
2006
SBP Operating fixed assets
100
112.7
259.4
308.9
404.8
Other assets
100
150.3
149.8
117.5
120.4
Total assets
100
132.5
182.8
222.0
278.7
An upward trend in deposits accompanied by a upward trend in advances too, and mark up revenues means in effective credit policies, efficient credit collection resulting in healthy financial development. The property plant and equipment is the kind of asset, which is required by the service business only to increase its network therefore the ratio of the bank’s plant and equipments as compared with the other important particulars of the assets is high. But here one thing should be mentioned that it is the policy of the bank not to start the business on the rented premises. The bank has mostly started business on its own premises. The other assets of the bank are also showing a good amount that means that bank is in position to earn money from every available source.
BUSINESS TRANSACTED
129
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 2002 Business
2004
2005
2006
48.7 56.8 14.4
75.2 70.1 25.3
(Rs. In billion)
Transacted Imports Exports Guarantees
2003
26.2 30.6 4.8
32.0 38.8 6.2
40.2 47.3 14.2
130
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT TREND ANALYSIS 2002
2003
Business
2005
2006
185.8 185.6 300.0
287.0 229.1 527.1
(PERCENTAGE)
Transacted Imports Exports Guarantees
2004
100 100 100
122.1 126.8 129.2
153.4 154.5 295.8
Now we will discuss the business transacted opt the bank in terms of import and exports we see that imports and exports through ACBL are continuously on increase which is a very health sign for the banking business as the banks earn major portion of their profit through imports and exports. It shows the efficiency of the credit department. The reasons for this improvement may be •
Careful scrutinizing of all the documents
•
Intelligent corresponding with the customer
•
True 7 C’s analysis of the customer such as his business and moral character
This improvement in imports and exports is extremely large if we compare it with the figures of 2000.
COMMON SIZE ANALYSIS 131
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT (VERTICAL ANALYSIS) COMMON SIZE ANALYSIS An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statements items are divided by net sales or revenues. In addition to other financial ratios over time, it is often useful to express balance sheet items and income statement items as percentages. Common –size Analysis, also called Vertical Analysis, or Component Percentage, or 100 percent Statements as each statement is reduced to the total of 100 and each individual item is stated as a percentage of the total of 100.
2002
2003 2004 2005 (Vertical Analysis)
2006
100 83.6 59.2
100 84.2 57.5
100 85.2 52.9
100 81.0 27.4
100 73.3 18.2
13.2
13.4
5.24
12.7
13.6
3.18 24.4 17.7 23.1 3.49 19.6 11.3 8.23
3.94 26.7 16.9 25.6 5.61 19.9 9.07 10.9
4.33 32.3 19.2 27.9 6.15 21.8 9.76 12.0
6.30 53.6 28.6 43.9 6.12 37.8 15.9 21.9
13.1 55.0 30.1 51.6 5.15 46.4 15.0 31.4
Profitability Total Income Interest income Interest exp Fee, comm. Exch.Income Other income Spread Operating expenses Operating Profit Non performing assets Profit b/f tax Taxation Profit after taxation
132
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
INTERPRETATION The most important component of any profit and loss account of a banking concern is its mark up expenses it has to pay for servicing the depositors. The foregoing data shows that the markup expenses absorb about 85% of the revenues (a favorable position). This shows that the bank has been successful in •
Selling larger volumes of higher profit items.
•
Increasing economy in procurement
•
Adopting other effective and more profitable deposit raising policies at a lower lost.
133
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The interest expense of the ACBL is 18.2% of the total revenue of the bank in 2004, which is remarkable as the bank is earning about 85% of the revenue as interest income. We have handsome margin between the interest income and the interest expense of the bank. The data shows that the bank’s other income %age is not as much high rather it is very low which shows that the bank does not rely on other sources for its profit but it earns major portion of its income through its basic business. The bank seems to have increased control over its operating expenses, i.e. non-mark up expenses as these now absorb only 30% on average of the total revenues, that is a very healthy sign for the bank. In the net shell, it would not be wrong to say that the bank has improved its financial position and operating efficiency over the last years. The profit after tax is showing about 31.4% of the total revenues of the bank although the margin of profit is not too much high but it is shown from the data that the bank is going on increasing its profit after tax over the year.
LIABILITIES AND OWNER’S EQUITY (Vertical Analysis)
134
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Total share holders fund Share capital Reserves Customers deposits Refinance borrowings Other liabilities Total
2002
2003 2004 2005 (Vertical Analysis)
2006
5.29
4.82
5.69
5.65
5.38
2.42 3.02 74.6
1.93 2.84 76.9
1.48 2.64 70.5
1.28 3.09 69.0
1.12 3.86 74.5
7.08
6.02
4.62
8.21
8.74
7.52
7.43
15.0
12.7
6.31
100
100
100
100
100
INTERPRETATION The liabilities and owner’s equity are side components of the bank showing the relationship as compared with the total of the liabilities and owner’s equity. The bank’s shareholders fund is showing percentage more than the share capital, which shows that the bank own capital is lees than the shareholders capital. However it is also evident from 135
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT the data that the %age is decreasing of the overall %age of the share capital over the last two or three years. But it is also seen that the share capital %age as compared to the total liabilities of the bank has also been decreased. So we can say that the same conditions are prevailing regarding the share capital and the shareholders fund.
Among the assets of the bank the highest %age is of the customer deposits. The bank’s management seems to have adopted a very effective marketing policy, as the deposits of the bank constitute about 75% of the total assets of the bank. In the last year, this figure stood at 69% of the total resource. This shows the high level of products and associated services provided by the bank.
ASSETS (Vertical Analysis)
2002
2003 2004 2005 (Vertical Analysis)
2006
Advances
46.5
45.7
42.7
52.4
65.2
Investments Cash, short funds and
22.4
22.9
38.0
25.8
16.1
statutory deposits with
26.1
26.3
14.3
17.6
14.8
Operating fixed assets
1.67
1.42
2.36
2.32
2.42
Other assets
3.15
3.57
2.58
1.67
1.36
Total assets
100
100
100
100
100
Assets
SBP
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INTERNSHIP REPORT
137
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT INTERPRETATION On one hand Advances have also increased from 52% in the previous year to 65% in the current year which may indicate that the bank utilize the funds raised in the other activities primarily lending to the financial institutions as it is the most secure source of financing available in the economy. Cash, short term funds and statutory deposits with SBP are also increasing. The property plant and equipment of the bank is showing a little portion of the bank’s total assets. In the last the bank is over all showing a good financial health and is going on healthy tracks in near future it has no risk of bankruptcy. Although the bank is showing good results but we can’t say that these are the best conditions prevailing in the bank as we are unaware of the market conditions and can’t compare it with other banks.
RATIO ANALYSIS PROFITABILITY RATIOS LIQUIDITY RATIOS PROFITABILITY RATIOS
The continued viability of any bank depends on its ability to earn an appropriate return on its assets and capital. Good earning performance enables a bank to fund its operations, remain competitive in the market and increase or decrease in market funds.
RETURN ON CAPITAL FUND Formula
=
Net mark up Received Capital Funds 138
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT 2006
=
2005 2004
3370000 =
=
=
60.47%
5573149 2694106
=
69.06%
3901279 1638357
=
54.13%
3026550
70 68 66 percentage
64 62 60 58 56 2003
2004
2006 year
INTERPRETATION
This ratio relates the net profits to the amount of capital funds that have been employed in making that profit.
139
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The above given ratios suggest that the profitability of the bank has increased very in the year 2003 indicating more profitable operations of the bank. While discussing the trend analysis, we mentioned that the mark up charges have increased in some proportion but the mark up earned by the bank resulting increase in the profit available on the capital funds employed. This ratio showing a very good financial position of the bank.
RETURN ON INVESTMENT Formula
=
Net income after taxes Total Assets
2006
=
3370000
2005
=
5573149 1103065
=
1.29%
=
85386902 686994
=
0.98%
2004
=
1.79%
70313073
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
2 1.5 percentage
1 0.5 0 2004
2005
2006 year
INTERPRETATION
This ratio indicates the profit earned by the bank on the resources employed. As far as ACBL is concerned, we observe an increase in the utilization of the resources. It has increased to 1.29 % in the year 2003 from 0.98 % in the year 2002, It has increased to 1.79 % in the year 2004 from 1.29 % in the year 2003, the reason behind the slight increase in the increase of profit may be due to the efforts of the management.
RETURN ON RISK ASSETS Formula
=
Net income after taxes Total risk assets
141
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INTERNSHIP REPORT 2006
=
2005
69938041 1103065
2004
=
=
1923040
= =
44777538 550051
2.75% 2.46% =
2.36%
23291367
2.8 2.7 2.6 percentag 2.5 e 2.4 2.3 2.2 2.1 2004
2005
2006
year
INTERPRETATION This ratio, with some fluctuation in 2003 came up from 2.46% in 2003 to2.75 % in the year 2004. It is indicating active utilization in the form of advances. The bank is finding it difficult to keep the level of its expenses less in proportion to the advances it has disbursed. Lending, no doubt is the core function of a banking concern. But the bank should find out effective ways of credit provisions affecting less on profitability of the operations. Non-mark up revenues should also be increased in the face of lower credit disbursements resulting in more.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
RETURN ON DEPOSITS Formula
=
Net income before taxes Total Deposits
2004
=
2842740
=
2005
=
83318795 1901800
2006
=
61657000 1244022
3.41% =
3.08%
=
2.47%
41200166
4 3 percentag 2 e 1 0 2004
2005
2006 year
INTERPRETATION This ratio indicates to what extent deposits which represent funds mobilization on the part of the bank contribute towards income generation. Although the other ratios regarding the profitability are showing satisfactory position of the bank but still bank
143
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT need to increase its utilization of resources in order to increase its profitability because the banks have to pay heavy taxes on their profit.
OPERATING EXPENSES TO NET REVENUE Formula
=
Operating Expenses Net Revenue (Rs. In million)
2006 2005 2004
=
1845
=
6121 1438
=
=
5028 1093
=
30.1% 28.6%
= 19.2%
5704
35 30 25 20 percentage 15 10 5 0 2004
2005
2006 year
144
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
INTERPRETATION This ratio signifies the proportion of the revenues that is used to cover the operating expenses of the bank. The ratios calculated above gives a good picture of the bank’s operations. This ratio is increasing from year 2002 to 2004 and giving a bright picture of the profits for the bank. With respect to the banking expansions this ratio is showing a very good picture as we know the expansions required lot of expansions, although the operating expenses of the bank are increasing as we have seen in the trend ratio but their proportion of increase is not alarming. In short, the bank in an attempt to maintain at a good level of liquidity, has a low level of profitability but there is a continuous push in the profits and there are chances that the bank will reach at a point of high liquidity and profitability.
LIQUIDITY RATIOS The liquidity position of a bank is like a reservoir. It may be adequate, although nearly depleted, just before the start of the rainy season. Or it may be inadequate, although three quarters full just before the summer drought. Liquidity can be defined as: “The bank’s ability not only to meet possible deposit withdrawals but also to provide for the legitimate needs of the economy as well”
145
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT ADVANCES TO DEPOSITS RATIO
Formula
=
Advances Total Deposits
2006
=
69938041
=
83.9%
2005
=
83318795 44778000
=
58.6%
2004
=
61657000 30035484
=
72.62%
51731506
100 80 percentage
60 40 20 0 2004
2005
2006
year
146
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
INTERPRETATION It demonstrate the degree to which bank has already used up its available resources to accommodate the credit needs of its customers. This ratio, a comparison of funds generation and its funds mobilization, indicates the total loans sanctioned by the bank in relation to total amount of money deposited with the bank stands at 83.9% compared with the last year figure of 58.6%. This shows that the bank has greater potential to advance additional loans. Total loan able funds roughly measured by the deposits are sufficient to enable the bank to make additional loans without recourse to more or less continuous borrowing. At present, the bank has got a relatively small amount of advances as compared with its deposits raised. One reason for fewer advances is the cautious and selective approach on the part of the management while deciding upon credit proposals.s DUE FROM BANKS TO TOTAL ASSETS Formula
=
Due from banks Total Assets
2006 2005 2004
= =
2324839
=
107167541 5770842 =
=
85386902 3414470
2.17% 6.75% =
4.86%
70313073
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INTERNSHIP REPORT
8 7 6 5 percentage 4 3 2 1 0 2004
2005
2006 year
INTERPRETATION It is an indication of ACBL’s funds management policies. The funds allocation to the financial institutions has increased to a great extent despite the fact that still it holds a small proportion relevant to the total resources raised by the bank. It is a positive indicator in the sense that the financing to the banks are the most secure ways of lending. Considering the economic conditions of the country, it seems to be the best alternative available to the bank. In the current year this ratio has been reduced to the little extent. Although it is declining but the situation might not be alarming.
148
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT DUE FROM BANKS TO DUE TO BANKS Formula
=
Due from banks Due to Banks
2006 2005 2004
=
=
2324839
=
=
13781555 5770842
16.87% =
15903055 3414470
=
36.29%
29.79%
11460394
40 30 percentage 20 10 0 2004
2005
2006 year
INTERPRETATION It shows the relationship between what the bank owes from other banks and what is due to it. An unfavorable condition has been observed in this ratio in the current year showing the fact that the bank has to seek fewer funds from the financial institutions owing to the strong liquid financial position. This ratio is going on increasing in last year but decreasing in current year, which involves a slight risk. In the phase of economic
149
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT instability, the bank’s management should be efficient to access the risk involved in lending and they should control this ratio. DUE TO BANKS TO TOTAL DEPOSITS Formula
=
Due to banks Total deposits
2006 2005 2004
=
13781555
=
83318795 15903055 =
=
16.54% =
61656607 11460394
25.79% = 22.15%
51732000
30 25 20 percentage 15 10 5 0 2004
2005
2006 year
INTERPRETATION 150
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT This ratio is an indicative of the proportion of the lending from the financial institutions in relation to the total funds raised by the bank in the form of deposits. This ratio for ACBL is 16.54% in the year 2004. There has been a significant decline in this ratio as previously the bank depended slightly more on the borrowings from financial institutions. It shows that the bank is concentrating on raising funds from depositors and trying to relies less on the borrowed funds. •
It is a favorable indication in the sense that the bank has large potential to ask for borrowed funds in the phase of tight liquidity position.
•
Further more, it shows the efficiency of the marketing department to have created so much of deposits that the bank does not need to look at the financial institutions for help in improving its liquid position.
•
There is another favorable aspect of this declining tendency. The rate of interest offered to the depositors is very low in comparison with the interest to be paid to the financial institutions for their funds. A decline in this ratio means less mark up burden on the bank resulting in less financial risk for the bank.
151
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT “SWOT ANALYSIS”
STRENGTHS In the bank service quality standards are designed and monitored to ensure a consistent and convenient customer experience. Products and services are as diverse as market segments. Bank has structured and syndicated financing arrangements, working capital finance, financing of international trade, consumer credit, small business loans, credit cards and ATM cards.
The
human resource philosophy at Askari Bank focuses on multi-talent hiring,
professional grooming, requisite training and merit based reward system. Staff welfare has always been a priority. New initiatives like hospitalization plan, home loan insurance have added new dimensions to the staff-care policy and motivated them to out-perform competitors. Bank enjoys a strategic competitive advantage over all domestic players by virtue of its leadership in technological innovations. Different cameras are located at different locations to monitor the working of staff members and outside customers by branch manager. Bank has fully automated transaction-processing systems for back-office support. Bank's branch network is connected on-line real-time and customers have access to off-site as well as on-site ATMs, all over Pakistan. Bank also is pioneer in e-commerce venture in Pakistan through a major retail distributor. From a humble beginning with just 10 branches in 1993, today bank enjoys a network of 36 outlets, spread across the country. A network of self-service ATMs supports these outlets.
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THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT ATM card is available with the withdrawal amount about Rs. 25000 a day. Bank's total assets now exceed Rs.70.9 billion and bank has over 17 products and services to match the individual needs of the customers. Bank has been honoured with the "The Best Bank in Pakistan" award by the Global Finance Magazine. Bank was the first bank in Pakistan to offer Internet Banking services, b2b ecommerce solutions for merchants looking to purchase on credit and E-bill payment system. With a network of 187 correspondents spread over 95 countries world-wide, the bank continued to reinforce its leadership position in trade finance, transacting business of over Rs.70 billion, during this year. Bank is now actively involved in the acquisition of business and signed up over 300 merchants national wide which offer-shopping discount to the Bank's Privilege Card members. Askari Master Card is accepted worldwide and at over 3000 locations in Pakistan.
WEAKNESSES Bank is providing credit facilities only to the urban areas not too much attention is paid to the rural areas. As Pakistan is agriculture country but no special schemes for the agri- loans. Bank is not giving emphasis on the small-scale businesses. Which are large in number in Pakistan. There is enormous difference between the bank-lending rate and return on deposits..
153
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT The procedure and documentation while sanction loan is thorny. Which is a barrier for advances. Bank gives targets to employees for deposits due to this reason they pay more attention to fulfil these targets to save their jobs. This distracts their attention from their duties. Reasonable care is not taken while opening new accounts one of the reason is because employees want to introduce more and more depositors. No job security is there for the employees, and no union exits to secure them. The online credit card facility was not secured that is why recently bank has closed its online credit card shopping scheme. Bank has not adequate number of branches as compared to its competitors like MCB, UBL, ABL, NBP etc. Due to small number of branches at greater distance potential customers may go to other more feasible options. A good number of facilities are only for the army persons, not for the general public. As every person in the bank has his/her own computer in the branch but they are not well equipped with the knowledge of using the computer efficiently. The return on deposits is very low. ACBL has only agency arrangements with the foreign banks, no branch exists outside the Pakistan. While their main competitors have their own branch network outside the Pakistan. Bank has no grievance-handling department for the internal problems of the employees. Due to lack of computer specialist at branch level it has to take assistance from the head office.
154
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT To improve the services and to remove the problems of customer the bank has no customer complaint department. Limited locker facility is there, which do not fulfil the requirements of customer and charges of lockers are also very high.
OPPORTUNITIES Bank has a small branch network so it has got the opportunities to increase the number of its branches. Bank has no foreign branches so it should open its branches outside the country especially in U.K, U.S.A and in U.A.E. Facilities like financing of housing should also be offered to general public especially in the urban areas, not only army officers.
In
agrarians cities like Rahim Yar Khan there is a potential for giving credit
facilities to farmers. At least on software and hardware technician should be appointed at each branch. Bank is not yet performing utility services for the utility companies like WAPDA it can increase its operations also in this direction and so a new source of earning. To increase its advances bank should focus small scale industries and choose one among them and then a special scheme of lending should be introduced for that particular small scale industry.
TH REATS Law and order situation in Pakistan is faulty that is why people are not confident to invest anywhere. The markets rates are now at extremely low levels, with very little chance of their going up during the rest of the year. The low interest rate means low profits for the banks. 155
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Saving rate in Pakistan is
very low i.e.15% as compared to 30% in China and
40% in Malaysia. This is a problem in Pakistan. As the banking procedures are complicated that is why general public takes interest into other options of investments like in shares of companies and in Term Finance Certificates. Responding to the SBP's prudential regulations management takes too much care while granting loans. Now other banks are also imitating the modern banking concept of ACBL and have started online facility and also have computerized their operations. So there remain less competitive advantage areas for the bank. Now the world is a global village so competitors may rise from anywhere in the world at anytime. To survive in the industry and to earn profits bank should not rely on its present sources and facilities instead of this it should establish new ways of acquiring, managing and sharing market information. In near future the world is going to be free trade zone so the concept of "survival of the fittest" will be in action. After the 11 September incident and due to terrorist activities in Pakistan the economy is moving very slow. It means less investment and as a result low loan demands. High rate of taxes on banking companies.
SBP have a heavy penalties on banks for violating the Prudential Regulation. So it requires greater care while advancing. Increasing ATM trend among the banks also requires attention of the management to this side.
156
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT
Recommendations and Suggestions: To survive in the industry and to earn profits bank should not rely on its present sources and facilities but also it should establish new ways of acquiring, managing and sharing market information.
To increase the computer specialist at branch level . To improve the services and to remove the problems of customer
by making a
spread customer complaint department. To increase locker facility and decrease the charges of lockers. Law and order situation in Pakistan is faulty that is why people are not confident to invest anywhere so we must control it. Job description must be clear so that it can define the job related duties and responsibilities..
To increase the number of Bank should not
branches.
gives targets to employees for deposits because it distracts their
attention from their duties.
Keep the up to date information on their web sites. Bank should try to separate the working area and customers visit area. Instead of preferring the old employees of the other banks management should hire new and well-educated talent. This will contribute to the long-term benefits of the bank. Credit policy should cover both the rural and as well as urban areas. Credit facilities should be enhanced to small-scale businesses. The facilities currently availing by the army persons only, can be extended to general public e.g. house building finance.
157
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT Employees who perform extraordinary and achieve more than their targets should be given bonuses.
158
THE ISLAMIA UNIVERSITY OF BAHAWALPUR
INTERNSHIP REPORT There should be separate marketing department in each branch. Although it will increase the expenses but benefits will be greater than expenses. Returns on the term and fixed deposits should be increased to the level of competitors.
CONCLUSION Overall analysis of the bank leads to the conclusion that bank is performing at satisfactory level. The bank is no doubt the best Modern Bank in Pakistan. And to keep competitive advantage over its existing and potential competitors bank is trying to introduce latest techniques on regular basis. The customers of the bank are increasing every year and that is why not only the deposits of the bank are increasing but also advances by the bank shows a steady growth during the last 5 years. As a result of increasing advances and investment in higher yielding Treasury Bills. Equity base of the bank is also increasing and in year 2000 it showed a positive growth of 20% over the period of last 5 years. Total assets of the bank are also increasing continuously. Similarly the earning per share is also increasing. During last year this ratio was highest in last 5 years. During its short life of operation bank has achieved many awards not only with in Pakistan but also from outside the Pakistan. So we easily without any qualm can conclude that; "Bank is going exactly on the way of development and progression"
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INTERNSHIP REPORT
References: Web Sites: -
www.askaribank.com www.sbp.org.net.pk www.pkeconomist.com www.google.com
Books Financial Statement Analysis ( Charles H. Gibson) HR & Personnel Manegement ( Werther )
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